Correlation Between SI TECH and Tjk Machinery

Can any of the company-specific risk be diversified away by investing in both SI TECH and Tjk Machinery 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 SI TECH and Tjk Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SI TECH Information Technology and Tjk Machinery Tianjin, you can compare the effects of market volatilities on SI TECH and Tjk Machinery 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 SI TECH with a short position of Tjk Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of SI TECH and Tjk Machinery.

Diversification Opportunities for SI TECH and Tjk Machinery

0.71

Correlation Coefficient

SI TECH  Tjk Machinery

Poor diversification

The 3 months correlation between 300608 and Tjk is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SI TECH Information Technology and Tjk Machinery Tianjin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tjk Machinery Tianjin and SI TECH 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 SI TECH Information Technology are associated (or correlated) with Tjk Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tjk Machinery Tianjin has no effect on the direction of SI TECH i.e., SI TECH and Tjk Machinery go up and down completely randomly.

Pair Corralation between SI TECH and Tjk Machinery

Assuming the 90 days trading horizon SI TECH is expected to generate 1.31 times less return on investment than Tjk Machinery. In addition to that, SI TECH is 1.41 times more volatile than Tjk Machinery Tianjin. It trades about 0.06 of its total potential returns per unit of risk. Tjk Machinery Tianjin is currently generating about 0.11 per unit of volatility. If you would invest  1,095  in Tjk Machinery Tianjin on September 26, 2024 and sell it today you would earn a total of  257.00  from holding Tjk Machinery Tianjin or generate 23.47% return on investment over 90 days.

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

SI TECH Information Technology  vs.  Tjk Machinery Tianjin

SI TECH Information

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SI TECH Information Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SI TECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Tjk Machinery Tianjin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tjk Machinery Tianjin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tjk Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SI TECH and Tjk Machinery

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

The idea behind SI TECH Information Technology and Tjk Machinery Tianjin 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.