Correlation Between Tianjin Pengling and New China

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Can any of the company-specific risk be diversified away by investing in both Tianjin Pengling and New China 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 Pengling and New China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tianjin Pengling Rubber and New China Life, you can compare the effects of market volatilities on Tianjin Pengling and New China 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 Pengling with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Pengling and New China.

Diversification Opportunities for Tianjin Pengling and New China

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Tianjin and New is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Pengling Rubber and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and Tianjin Pengling 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 Pengling Rubber are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of Tianjin Pengling i.e., Tianjin Pengling and New China go up and down completely randomly.

Pair Corralation between Tianjin Pengling and New China

Assuming the 90 days trading horizon Tianjin Pengling Rubber is expected to generate 0.91 times more return on investment than New China. However, Tianjin Pengling Rubber is 1.1 times less risky than New China. It trades about 0.02 of its potential returns per unit of risk. New China Life is currently generating about 0.01 per unit of risk. If you would invest  532.00  in Tianjin Pengling Rubber on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Tianjin Pengling Rubber or generate 0.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Tianjin Pengling Rubber  vs.  New China Life

 Performance 
       Timeline  
Tianjin Pengling Rubber 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Pengling Rubber are ranked lower than 13 (%) 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.
New China Life 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New China sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Pengling and New China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tianjin Pengling and New China

The main advantage of trading using opposite Tianjin Pengling and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianjin Pengling position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.
The idea behind Tianjin Pengling Rubber and New China Life 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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