Correlation Between Tianjin Pengling and Gansu Jiu

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

By analyzing existing cross correlation between Tianjin Pengling Rubber and Gansu Jiu Steel, you can compare the effects of market volatilities on Tianjin Pengling and Gansu Jiu 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 Pengling with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Pengling and Gansu Jiu.

Diversification Opportunities for Tianjin Pengling and Gansu Jiu

0.75

Correlation Coefficient

Tianjin Pengling  Gansu Jiu

Poor diversification

The 3 months correlation between Tianjin and Gansu is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Pengling Rubber and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and Tianjin Pengling 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 Pengling Rubber are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Tianjin Pengling i.e., Tianjin Pengling and Gansu Jiu go up and down completely randomly.

Pair Corralation between Tianjin Pengling and Gansu Jiu

Assuming the 90 days trading horizon Tianjin Pengling is expected to generate 12.36 times less return on investment than Gansu Jiu. But when comparing it to its historical volatility, Tianjin Pengling Rubber is 1.14 times less risky than Gansu Jiu. It trades about 0.0 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Gansu Jiu Steel on September 28, 2024 and sell it today you would earn a total of  11.00  from holding Gansu Jiu Steel or generate 7.38% return on investment over 90 days.

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

Tianjin Pengling Rubber  vs.  Gansu Jiu Steel

Tianjin Pengling Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Pengling Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tianjin Pengling is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gansu Jiu Steel

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tianjin Pengling and Gansu Jiu

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

The idea behind Tianjin Pengling Rubber and Gansu Jiu Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.