Correlation Between China Greatwall and Jinsanjiang (Zhaoqing)

Can any of the company-specific risk be diversified away by investing in both China Greatwall and Jinsanjiang (Zhaoqing) 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 China Greatwall and Jinsanjiang (Zhaoqing) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Greatwall Computer and Jinsanjiang Silicon Material, you can compare the effects of market volatilities on China Greatwall and Jinsanjiang (Zhaoqing) 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 China Greatwall with a short position of Jinsanjiang (Zhaoqing). Check out your portfolio center. Please also check ongoing floating volatility patterns of China Greatwall and Jinsanjiang (Zhaoqing).

Diversification Opportunities for China Greatwall and Jinsanjiang (Zhaoqing)

0.11

Correlation Coefficient

China Greatwall  Jinsanjiang (Zhaoqing)

Average diversification

The 3 months correlation between China and Jinsanjiang is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Greatwall Computer and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang (Zhaoqing) and China Greatwall 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 China Greatwall Computer are associated (or correlated) with Jinsanjiang (Zhaoqing). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang (Zhaoqing) has no effect on the direction of China Greatwall i.e., China Greatwall and Jinsanjiang (Zhaoqing) go up and down completely randomly.

Pair Corralation between China Greatwall and Jinsanjiang (Zhaoqing)

Assuming the 90 days trading horizon China Greatwall Computer is expected to under-perform the Jinsanjiang (Zhaoqing). In addition to that, China Greatwall is 1.01 times more volatile than Jinsanjiang Silicon Material. It trades about -0.03 of its total potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about -0.02 per unit of volatility. If you would invest  1,281  in Jinsanjiang Silicon Material on December 27, 2024 and sell it today you would lose (76.00) from holding Jinsanjiang Silicon Material or give up 5.93% of portfolio value over 90 days.

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

China Greatwall Computer  vs.  Jinsanjiang Silicon Material

China Greatwall Computer

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Greatwall Computer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Greatwall is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinsanjiang (Zhaoqing)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinsanjiang Silicon Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinsanjiang (Zhaoqing) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Greatwall and Jinsanjiang (Zhaoqing)

The main advantage of trading using opposite China Greatwall and Jinsanjiang (Zhaoqing) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Greatwall position performs unexpectedly, Jinsanjiang (Zhaoqing) 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 Jinsanjiang (Zhaoqing) will offset losses from the drop in Jinsanjiang (Zhaoqing)'s long position.

The idea behind China Greatwall Computer and Jinsanjiang Silicon Material 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.