Correlation Between PT Steel and Tianjin Capital

Can any of the company-specific risk be diversified away by investing in both PT Steel and Tianjin 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 PT Steel and Tianjin Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Steel Pipe and Tianjin Capital Environmental, you can compare the effects of market volatilities on PT Steel and Tianjin 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 PT Steel with a short position of Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Steel and Tianjin Capital.

Diversification Opportunities for PT Steel and Tianjin Capital

0.04

Correlation Coefficient

PT Steel  Tianjin Capital

Significant diversification

The 3 months correlation between S08 and Tianjin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi and PT Steel 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 PT Steel Pipe are associated (or correlated) with Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of PT Steel i.e., PT Steel and Tianjin Capital go up and down completely randomly.

Pair Corralation between PT Steel and Tianjin Capital

Assuming the 90 days horizon PT Steel Pipe is expected to generate 2.95 times more return on investment than Tianjin Capital. However, PT Steel is 2.95 times more volatile than Tianjin Capital Environmental. It trades about 0.04 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about -0.02 per unit of risk. If you would invest  1.10  in PT Steel Pipe on December 19, 2024 and sell it today you would earn a total of  0.05  from holding PT Steel Pipe or generate 4.55% return on investment over 90 days.

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

PT Steel Pipe  vs.  Tianjin Capital Environmental

PT Steel Pipe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tianjin Capital Envi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tianjin Capital Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tianjin Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Steel and Tianjin Capital

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

The idea behind PT Steel Pipe and Tianjin Capital Environmental 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.