Correlation Between Jilin Chemical and Wintao Communications

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

Diversification Opportunities for Jilin Chemical and Wintao Communications

0.58

Correlation Coefficient

Jilin Chemical  Wintao Communications

Very weak diversification

The 3 months correlation between Jilin and Wintao is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Wintao Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintao Communications 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 Wintao Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintao Communications has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Wintao Communications go up and down completely randomly.

Pair Corralation between Jilin Chemical and Wintao Communications

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to under-perform the Wintao Communications. But the stock apears to be less risky and, when comparing its historical volatility, Jilin Chemical Fibre is 1.61 times less risky than Wintao Communications. The stock trades about -0.53 of its potential returns per unit of risk. The Wintao Communications Co is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Wintao Communications Co on October 14, 2024 and sell it today you would lose (464.00) from holding Wintao Communications Co or give up 18.75% of portfolio value over 90 days.

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

Jilin Chemical Fibre  vs.  Wintao Communications Co

Jilin Chemical Fibre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 2 (%) 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.

Wintao Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wintao Communications Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jilin Chemical and Wintao Communications

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

The idea behind Jilin Chemical Fibre and Wintao Communications 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.