Correlation Between Jilin Chemical and Guangzhou Boji

Can any of the company-specific risk be diversified away by investing in both Jilin Chemical and Guangzhou Boji 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 Guangzhou Boji 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 Guangzhou Boji Medical, you can compare the effects of market volatilities on Jilin Chemical and Guangzhou Boji 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 Guangzhou Boji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin Chemical and Guangzhou Boji.

Diversification Opportunities for Jilin Chemical and Guangzhou Boji

0.74

Correlation Coefficient

Jilin Chemical  Guangzhou Boji

Poor diversification

The 3 months correlation between Jilin and Guangzhou is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical 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 Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Guangzhou Boji go up and down completely randomly.

Pair Corralation between Jilin Chemical and Guangzhou Boji

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to under-perform the Guangzhou Boji. But the stock apears to be less risky and, when comparing its historical volatility, Jilin Chemical Fibre is 1.21 times less risky than Guangzhou Boji. The stock trades about -0.01 of its potential returns per unit of risk. The Guangzhou Boji Medical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  786.00  in Guangzhou Boji Medical on October 9, 2024 and sell it today you would earn a total of  42.00  from holding Guangzhou Boji Medical or generate 5.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Jilin Chemical Fibre  vs.  Guangzhou Boji Medical

Jilin Chemical Fibre

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 3 (%) 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.

Guangzhou Boji Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jilin Chemical and Guangzhou Boji

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

The idea behind Jilin Chemical Fibre and Guangzhou Boji Medical 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.