Correlation Between Tianjin Capital and Muyuan Foodstuff

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

Diversification Opportunities for Tianjin Capital and Muyuan Foodstuff

0.44

Correlation Coefficient

Tianjin Capital  Muyuan Foodstuff

Very weak diversification

The 3 months correlation between Tianjin and Muyuan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Muyuan Foodstuff Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muyuan Foodstuff 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 Muyuan Foodstuff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muyuan Foodstuff has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Muyuan Foodstuff go up and down completely randomly.

Pair Corralation between Tianjin Capital and Muyuan Foodstuff

Assuming the 90 days trading horizon Tianjin Capital Environmental is expected to generate 1.13 times more return on investment than Muyuan Foodstuff. However, Tianjin Capital is 1.13 times more volatile than Muyuan Foodstuff Co. It trades about 0.02 of its potential returns per unit of risk. Muyuan Foodstuff Co is currently generating about -0.15 per unit of risk. If you would invest  587.00  in Tianjin Capital Environmental on September 28, 2024 and sell it today you would earn a total of  8.00  from holding Tianjin Capital Environmental or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Tianjin Capital Environmental  vs.  Muyuan Foodstuff Co

Tianjin Capital Envi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tianjin Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Muyuan Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muyuan Foodstuff Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tianjin Capital and Muyuan Foodstuff

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

The idea behind Tianjin Capital Environmental and Muyuan Foodstuff Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..