Correlation Between Tianjin Realty and New Hope

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

By analyzing existing cross correlation between Tianjin Realty Development and New Hope Dairy, you can compare the effects of market volatilities on Tianjin Realty and New Hope 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 Realty with a short position of New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Realty and New Hope.

Diversification Opportunities for Tianjin Realty and New Hope

0.96

Correlation Coefficient

Tianjin Realty  New Hope

Almost no diversification

The 3 months correlation between Tianjin and New is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and New Hope Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope Dairy and Tianjin Realty 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 Realty Development are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope Dairy has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and New Hope go up and down completely randomly.

Pair Corralation between Tianjin Realty and New Hope

Assuming the 90 days trading horizon Tianjin Realty Development is expected to generate 1.47 times more return on investment than New Hope. However, Tianjin Realty is 1.47 times more volatile than New Hope Dairy. It trades about 0.27 of its potential returns per unit of risk. New Hope Dairy is currently generating about 0.26 per unit of risk. If you would invest  134.00  in Tianjin Realty Development on September 15, 2024 and sell it today you would earn a total of  161.00  from holding Tianjin Realty Development or generate 120.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

Tianjin Realty Development  vs.  New Hope Dairy

Tianjin Realty Devel

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

New Hope Dairy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Hope sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Realty and New Hope

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

The idea behind Tianjin Realty Development and New Hope Dairy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.