Correlation Between Medibank Private and Tianjin Capital

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

By analyzing existing cross correlation between Medibank Private Limited and Tianjin Capital Environmental, you can compare the effects of market volatilities on Medibank Private and Tianjin Capital 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 Medibank Private with a short position of Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medibank Private and Tianjin Capital.

Diversification Opportunities for Medibank Private and Tianjin Capital

0.35

Correlation Coefficient

Medibank Private  Tianjin Capital

Weak diversification

The 3 months correlation between Medibank and Tianjin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private Limited and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi and Medibank Private 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 Medibank Private Limited are associated (or correlated) with Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Medibank Private i.e., Medibank Private and Tianjin Capital go up and down completely randomly.

Pair Corralation between Medibank Private and Tianjin Capital

Assuming the 90 days horizon Medibank Private is expected to generate 17.51 times less return on investment than Tianjin Capital. But when comparing it to its historical volatility, Medibank Private Limited is 2.72 times less risky than Tianjin Capital. It trades about 0.02 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Tianjin Capital Environmental on September 16, 2024 and sell it today you would earn a total of  7.00  from holding Tianjin Capital Environmental or generate 22.58% return on investment over 90 days.

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

Medibank Private Limited  vs.  Tianjin Capital Environmental

Medibank Private

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Medibank Private is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tianjin Capital Envi

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Medibank Private and Tianjin Capital

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

The idea behind Medibank Private Limited and Tianjin Capital Environmental 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .