Correlation Between Jilin Chemical and Zhangjiagang Freetrade

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

Diversification Opportunities for Jilin Chemical and Zhangjiagang Freetrade

0.76

Correlation Coefficient

Jilin Chemical  Zhangjiagang Freetrade

Poor diversification

The 3 months correlation between Jilin and Zhangjiagang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Jilin Chemical and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to generate 1.41 times more return on investment than Zhangjiagang Freetrade. However, Jilin Chemical is 1.41 times more volatile than Zhangjiagang Freetrade Science. It trades about 0.03 of its potential returns per unit of risk. Zhangjiagang Freetrade Science is currently generating about -0.02 per unit of risk. If you would invest  312.00  in Jilin Chemical Fibre on October 7, 2024 and sell it today you would earn a total of  25.00  from holding Jilin Chemical Fibre or generate 8.01% return on investment over 90 days.

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

Jilin Chemical Fibre  vs.  Zhangjiagang Freetrade Science

Jilin Chemical Fibre

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhangjiagang Freetrade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhangjiagang Freetrade Science has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhangjiagang Freetrade 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 Zhangjiagang Freetrade

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

The idea behind Jilin Chemical Fibre and Zhangjiagang Freetrade Science 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.