Correlation Between Jilin Chemical and Healthcare

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

Diversification Opportunities for Jilin Chemical and Healthcare

0.75

Correlation Coefficient

Jilin Chemical  Healthcare

Poor diversification

The 3 months correlation between Jilin and Healthcare is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Healthcare go up and down completely randomly.

Pair Corralation between Jilin Chemical and Healthcare

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to under-perform the Healthcare. In addition to that, Jilin Chemical is 1.2 times more volatile than Healthcare Co. It trades about -0.14 of its total potential returns per unit of risk. Healthcare Co is currently generating about -0.12 per unit of volatility. If you would invest  727.00  in Healthcare Co on October 5, 2024 and sell it today you would lose (59.00) from holding Healthcare Co or give up 8.12% of portfolio value over 90 days.

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

Jilin Chemical Fibre  vs.  Healthcare Co

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.

Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Jilin Chemical Fibre and Healthcare 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.