Correlation Between Tianjin Capital and JAPAN TOBACCO

Can any of the company-specific risk be diversified away by investing in both Tianjin Capital and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Tianjin Capital and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Capital and JAPAN TOBACCO.

Diversification Opportunities for Tianjin Capital and JAPAN TOBACCO

-0.05

Correlation Coefficient

Tianjin Capital  JAPAN TOBACCO

Good diversification

The 3 months correlation between Tianjin and JAPAN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between Tianjin Capital and JAPAN TOBACCO

Assuming the 90 days horizon Tianjin Capital Environmental is expected to under-perform the JAPAN TOBACCO. In addition to that, Tianjin Capital is 1.26 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.07 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.1 per unit of volatility. If you would invest  1,150  in JAPAN TOBACCO UNSPADR12 on December 30, 2024 and sell it today you would earn a total of  90.00  from holding JAPAN TOBACCO UNSPADR12 or generate 7.83% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  JAPAN TOBACCO UNSPADR12

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JAPAN TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tianjin Capital and JAPAN TOBACCO

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

The idea behind Tianjin Capital Environmental and JAPAN TOBACCO UNSPADR12 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.