Correlation Between Tianjin Capital and Acer Incorporated

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

Diversification Opportunities for Tianjin Capital and Acer Incorporated

0.28

Correlation Coefficient

Tianjin Capital  Acer Incorporated

Modest diversification

The 3 months correlation between Tianjin and Acer is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Acer Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer Incorporated 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 Acer Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer Incorporated has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Acer Incorporated go up and down completely randomly.

Pair Corralation between Tianjin Capital and Acer Incorporated

Assuming the 90 days horizon Tianjin Capital Environmental is expected to under-perform the Acer Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Tianjin Capital Environmental is 3.94 times less risky than Acer Incorporated. The stock trades about -0.02 of its potential returns per unit of risk. The Acer Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  460.00  in Acer Incorporated on December 20, 2024 and sell it today you would earn a total of  40.00  from holding Acer Incorporated or generate 8.7% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  Acer Incorporated

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.

Acer Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acer Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Acer Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Capital and Acer Incorporated

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

The idea behind Tianjin Capital Environmental and Acer Incorporated 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.