Correlation Between Tianjin Capital and KRAKATAU STEEL

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

Diversification Opportunities for Tianjin Capital and KRAKATAU STEEL

0.77

Correlation Coefficient

Tianjin Capital  KRAKATAU STEEL

Poor diversification

The 3 months correlation between Tianjin and KRAKATAU is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and KRAKATAU STEEL B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRAKATAU STEEL B 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 KRAKATAU STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRAKATAU STEEL B has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and KRAKATAU STEEL go up and down completely randomly.

Pair Corralation between Tianjin Capital and KRAKATAU STEEL

Assuming the 90 days horizon Tianjin Capital Environmental is expected to generate 0.79 times more return on investment than KRAKATAU STEEL. However, Tianjin Capital Environmental is 1.27 times less risky than KRAKATAU STEEL. It trades about 0.06 of its potential returns per unit of risk. KRAKATAU STEEL B is currently generating about 0.02 per unit of risk. If you would invest  12.00  in Tianjin Capital Environmental on September 20, 2024 and sell it today you would earn a total of  26.00  from holding Tianjin Capital Environmental or generate 216.67% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  KRAKATAU STEEL B

Tianjin Capital Envi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tianjin Capital reported solid returns over the last few months and may actually be approaching a breakup point.

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Capital and KRAKATAU STEEL

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

The idea behind Tianjin Capital Environmental and KRAKATAU STEEL B 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.