Correlation Between Tianjin Capital and BHP Group

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

Diversification Opportunities for Tianjin Capital and BHP Group

0.43

Correlation Coefficient

Tianjin Capital  BHP Group

Very weak diversification

The 3 months correlation between Tianjin and BHP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and BHP Group go up and down completely randomly.

Pair Corralation between Tianjin Capital and BHP Group

If you would invest  37.00  in Tianjin Capital Environmental on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Tianjin Capital Environmental or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Tianjin Capital Environmental  vs.  BHP Group Limited

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 uncertain basic indicators, Tianjin Capital reported solid returns over the last few months and may actually be approaching a breakup point.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, BHP Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tianjin Capital and BHP Group

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

The idea behind Tianjin Capital Environmental and BHP Group Limited 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.