Correlation Between Tianjin Capital and INTER CARS

Can any of the company-specific risk be diversified away by investing in both Tianjin Capital and INTER CARS 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 INTER CARS 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 INTER CARS SA, you can compare the effects of market volatilities on Tianjin Capital and INTER CARS 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 INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Capital and INTER CARS.

Diversification Opportunities for Tianjin Capital and INTER CARS

-0.51

Correlation Coefficient

Tianjin Capital  INTER CARS

Excellent diversification

The 3 months correlation between Tianjin and INTER is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and INTER CARS go up and down completely randomly.

Pair Corralation between Tianjin Capital and INTER CARS

Assuming the 90 days horizon Tianjin Capital Environmental is expected to generate 1.72 times more return on investment than INTER CARS. However, Tianjin Capital is 1.72 times more volatile than INTER CARS SA. It trades about 0.1 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.02 per unit of risk. If you would invest  32.00  in Tianjin Capital Environmental on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Tianjin Capital Environmental or generate 18.75% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  INTER CARS SA

Tianjin Capital Envi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tianjin Capital reported solid returns over the last few months and may actually be approaching a breakup point.

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tianjin Capital and INTER CARS

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

The idea behind Tianjin Capital Environmental and INTER CARS SA 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.