Correlation Between Tianjin Capital and PARK24

Can any of the company-specific risk be diversified away by investing in both Tianjin Capital and PARK24 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 Tianjin Capital and PARK24 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tianjin Capital Environmental and PARK24 LTD, you can compare the effects of market volatilities on Tianjin Capital and PARK24 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 Tianjin Capital with a short position of PARK24. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Capital and PARK24.

Diversification Opportunities for Tianjin Capital and PARK24

0.74

Correlation Coefficient

Tianjin Capital  PARK24

Poor diversification

The 3 months correlation between Tianjin and PARK24 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and PARK24 LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARK24 LTD and Tianjin Capital 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 Tianjin Capital Environmental are associated (or correlated) with PARK24. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARK24 LTD has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and PARK24 go up and down completely randomly.

Pair Corralation between Tianjin Capital and PARK24

Assuming the 90 days horizon Tianjin Capital Environmental is expected to generate 0.72 times more return on investment than PARK24. However, Tianjin Capital Environmental is 1.38 times less risky than PARK24. It trades about -0.1 of its potential returns per unit of risk. PARK24 LTD is currently generating about -0.16 per unit of risk. If you would invest  39.00  in Tianjin Capital Environmental on October 26, 2024 and sell it today you would lose (1.00) from holding Tianjin Capital Environmental or give up 2.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Tianjin Capital Environmental  vs.  PARK24 LTD

Tianjin Capital Envi

Risk-Adjusted Performance

0 of 100

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PARK24 LTD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PARK24 LTD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PARK24 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Capital and PARK24

The main advantage of trading using opposite Tianjin Capital and PARK24 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianjin Capital position performs unexpectedly, PARK24 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 PARK24 will offset losses from the drop in PARK24's long position.

The idea behind Tianjin Capital Environmental and PARK24 LTD 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.