Correlation Between Industrial and Tianjin Pengling

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

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

Diversification Opportunities for Industrial and Tianjin Pengling

0.33

Correlation Coefficient

Industrial  Tianjin Pengling

Weak diversification

The 3 months correlation between Industrial and Tianjin is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Tianjin Pengling Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Pengling Rubber and Industrial 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 Industrial and Commercial are associated (or correlated) with Tianjin Pengling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Pengling Rubber has no effect on the direction of Industrial i.e., Industrial and Tianjin Pengling go up and down completely randomly.

Pair Corralation between Industrial and Tianjin Pengling

Assuming the 90 days trading horizon Industrial is expected to generate 1.6 times less return on investment than Tianjin Pengling. But when comparing it to its historical volatility, Industrial and Commercial is 2.76 times less risky than Tianjin Pengling. It trades about 0.14 of its potential returns per unit of risk. Tianjin Pengling Rubber is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  418.00  in Tianjin Pengling Rubber on September 26, 2024 and sell it today you would earn a total of  64.00  from holding Tianjin Pengling Rubber or generate 15.31% return on investment over 90 days.

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

Industrial and Commercial  vs.  Tianjin Pengling Rubber

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tianjin Pengling Rubber

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Pengling Rubber are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Pengling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Tianjin Pengling

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

The idea behind Industrial and Commercial and Tianjin Pengling Rubber 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.