Correlation Between RONN and Tianjin Capital

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

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

Diversification Opportunities for RONN and Tianjin Capital

-0.77

Correlation Coefficient

RONN  Tianjin Capital

Pay attention - limited upside

The 3 months correlation between RONN and Tianjin is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding RONN Inc 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 RONN 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 RONN Inc 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 RONN i.e., RONN and Tianjin Capital go up and down completely randomly.

Pair Corralation between RONN and Tianjin Capital

Given the investment horizon of 90 days RONN Inc is expected to generate 15.86 times more return on investment than Tianjin Capital. However, RONN is 15.86 times more volatile than Tianjin Capital Environmental. It trades about 0.03 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.13 per unit of risk. If you would invest  0.07  in RONN Inc on September 26, 2024 and sell it today you would lose (0.04) from holding RONN Inc or give up 57.14% of portfolio value over 90 days.

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

RONN Inc  vs.  Tianjin Capital Environmental

RONN Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RONN Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, RONN displayed solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Capital Envi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, Tianjin Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RONN and Tianjin Capital

The main advantage of trading using opposite RONN and Tianjin Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RONN 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 RONN Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.