Correlation Between Tianci International and Dragon Capital

Can any of the company-specific risk be diversified away by investing in both Tianci International and Dragon Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tianci International and Dragon Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tianci International and Dragon Capital Grp, you can compare the effects of market volatilities on Tianci International and Dragon Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tianci International with a short position of Dragon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianci International and Dragon Capital.

Diversification Opportunities for Tianci International and Dragon Capital

0.22

Correlation Coefficient

Tianci International  Dragon Capital

Modest diversification

The 3 months correlation between Tianci and Dragon is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tianci International and Dragon Capital Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragon Capital Grp and Tianci International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tianci International are associated (or correlated) with Dragon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragon Capital Grp has no effect on the direction of Tianci International i.e., Tianci International and Dragon Capital go up and down completely randomly.

Pair Corralation between Tianci International and Dragon Capital

Given the investment horizon of 90 days Tianci International is expected to generate 5.87 times less return on investment than Dragon Capital. But when comparing it to its historical volatility, Tianci International is 4.3 times less risky than Dragon Capital. It trades about 0.1 of its potential returns per unit of risk. Dragon Capital Grp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Dragon Capital Grp on September 23, 2024 and sell it today you would earn a total of  0.01  from holding Dragon Capital Grp or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tianci International  vs.  Dragon Capital Grp

Tianci International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianci International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Tianci International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Dragon Capital Grp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dragon Capital Grp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Dragon Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianci International and Dragon Capital

The main advantage of trading using opposite Tianci International and Dragon Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianci International position performs unexpectedly, Dragon Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dragon Capital will offset losses from the drop in Dragon Capital's long position.

The idea behind Tianci International and Dragon Capital Grp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.