Correlation Between Jilin Chemical and Wuliangye Yibin

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

By analyzing existing cross correlation between Jilin Chemical Fibre and Wuliangye Yibin Co, you can compare the effects of market volatilities on Jilin Chemical and Wuliangye Yibin 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 Jilin Chemical with a short position of Wuliangye Yibin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin Chemical and Wuliangye Yibin.

Diversification Opportunities for Jilin Chemical and Wuliangye Yibin

0.39

Correlation Coefficient

Jilin Chemical  Wuliangye Yibin

Weak diversification

The 3 months correlation between Jilin and Wuliangye is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Wuliangye Yibin Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuliangye Yibin and Jilin Chemical 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 Jilin Chemical Fibre are associated (or correlated) with Wuliangye Yibin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuliangye Yibin has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Wuliangye Yibin go up and down completely randomly.

Pair Corralation between Jilin Chemical and Wuliangye Yibin

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to generate 1.77 times more return on investment than Wuliangye Yibin. However, Jilin Chemical is 1.77 times more volatile than Wuliangye Yibin Co. It trades about 0.05 of its potential returns per unit of risk. Wuliangye Yibin Co is currently generating about -0.11 per unit of risk. If you would invest  314.00  in Jilin Chemical Fibre on October 12, 2024 and sell it today you would earn a total of  25.00  from holding Jilin Chemical Fibre or generate 7.96% return on investment over 90 days.

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

Jilin Chemical Fibre  vs.  Wuliangye Yibin Co

Jilin Chemical Fibre

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wuliangye Yibin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuliangye Yibin Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jilin Chemical and Wuliangye Yibin

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

The idea behind Jilin Chemical Fibre and Wuliangye Yibin Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.