Correlation Between Beijing SPC and Tianjin Capital

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

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

Diversification Opportunities for Beijing SPC and Tianjin Capital

0.99

Correlation Coefficient

Beijing SPC  Tianjin Capital

No risk reduction

The 3 months correlation between Beijing and Tianjin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Beijing SPC Environment and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi and Beijing SPC 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 Beijing SPC Environment are associated (or correlated) with Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Beijing SPC i.e., Beijing SPC and Tianjin Capital go up and down completely randomly.

Pair Corralation between Beijing SPC and Tianjin Capital

Assuming the 90 days trading horizon Beijing SPC Environment is expected to generate 1.17 times more return on investment than Tianjin Capital. However, Beijing SPC is 1.17 times more volatile than Tianjin Capital Environmental. It trades about 0.23 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.21 per unit of risk. If you would invest  324.00  in Beijing SPC Environment on September 13, 2024 and sell it today you would earn a total of  124.00  from holding Beijing SPC Environment or generate 38.27% return on investment over 90 days.

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

Beijing SPC Environment  vs.  Tianjin Capital Environmental

Beijing SPC Environment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing SPC Environment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing SPC sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Capital Envi

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing SPC and Tianjin Capital

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

The idea behind Beijing SPC Environment and Tianjin Capital Environmental 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.