Correlation Between Erie Indemnity and Tian Ruixiang

Can any of the company-specific risk be diversified away by investing in both Erie Indemnity and Tian Ruixiang 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 Erie Indemnity and Tian Ruixiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erie Indemnity and Tian Ruixiang Holdings, you can compare the effects of market volatilities on Erie Indemnity and Tian Ruixiang 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 Erie Indemnity with a short position of Tian Ruixiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Tian Ruixiang.

Diversification Opportunities for Erie Indemnity and Tian Ruixiang

-0.27

Correlation Coefficient

Erie Indemnity  Tian Ruixiang

Very good diversification

The 3 months correlation between Erie and Tian is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Tian Ruixiang Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tian Ruixiang Holdings and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Tian Ruixiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tian Ruixiang Holdings has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Tian Ruixiang go up and down completely randomly.

Pair Corralation between Erie Indemnity and Tian Ruixiang

Given the investment horizon of 90 days Erie Indemnity is expected to generate 0.48 times more return on investment than Tian Ruixiang. However, Erie Indemnity is 2.08 times less risky than Tian Ruixiang. It trades about 0.01 of its potential returns per unit of risk. Tian Ruixiang Holdings is currently generating about -0.07 per unit of risk. If you would invest  41,791  in Erie Indemnity on December 27, 2024 and sell it today you would earn a total of  164.00  from holding Erie Indemnity or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Erie Indemnity  vs.  Tian Ruixiang Holdings

Erie Indemnity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erie Indemnity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Tian Ruixiang Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tian Ruixiang Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Erie Indemnity and Tian Ruixiang

The main advantage of trading using opposite Erie Indemnity and Tian Ruixiang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erie Indemnity position performs unexpectedly, Tian Ruixiang 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 Tian Ruixiang will offset losses from the drop in Tian Ruixiang's long position.

The idea behind Erie Indemnity and Tian Ruixiang Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.