Correlation Between TIMES CHINA and Deutsche Wohnen

Can any of the company-specific risk be diversified away by investing in both TIMES CHINA and Deutsche Wohnen 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 TIMES CHINA and Deutsche Wohnen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TIMES CHINA HLDGS and Deutsche Wohnen SE, you can compare the effects of market volatilities on TIMES CHINA and Deutsche Wohnen 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 TIMES CHINA with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of TIMES CHINA and Deutsche Wohnen.

Diversification Opportunities for TIMES CHINA and Deutsche Wohnen

-0.11

Correlation Coefficient

TIMES CHINA  Deutsche Wohnen

Good diversification

The 3 months correlation between TIMES and Deutsche is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding TIMES CHINA HLDGS and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and TIMES CHINA 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 TIMES CHINA HLDGS are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of TIMES CHINA i.e., TIMES CHINA and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between TIMES CHINA and Deutsche Wohnen

Assuming the 90 days horizon TIMES CHINA HLDGS is expected to generate 3.0 times more return on investment than Deutsche Wohnen. However, TIMES CHINA is 3.0 times more volatile than Deutsche Wohnen SE. It trades about 0.27 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about -0.06 per unit of risk. If you would invest  2.65  in TIMES CHINA HLDGS on September 23, 2024 and sell it today you would earn a total of  0.95  from holding TIMES CHINA HLDGS or generate 35.85% return on investment over 90 days.

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

TIMES CHINA HLDGS  vs.  Deutsche Wohnen SE

TIMES CHINA HLDGS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TIMES CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Wohnen SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Wohnen SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with TIMES CHINA and Deutsche Wohnen

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

The idea behind TIMES CHINA HLDGS and Deutsche Wohnen SE 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .