Correlation Between Jilin Chemical and Linewell Software

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

Diversification Opportunities for Jilin Chemical and Linewell Software

0.82

Correlation Coefficient

Jilin Chemical  Linewell Software

Very poor diversification

The 3 months correlation between Jilin and Linewell is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre and Linewell Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linewell Software 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 Linewell Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linewell Software has no effect on the direction of Jilin Chemical i.e., Jilin Chemical and Linewell Software go up and down completely randomly.

Pair Corralation between Jilin Chemical and Linewell Software

Assuming the 90 days trading horizon Jilin Chemical is expected to generate 1.76 times less return on investment than Linewell Software. But when comparing it to its historical volatility, Jilin Chemical Fibre is 1.33 times less risky than Linewell Software. It trades about 0.14 of its potential returns per unit of risk. Linewell Software Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  795.00  in Linewell Software Co on September 2, 2024 and sell it today you would earn a total of  426.00  from holding Linewell Software Co or generate 53.58% return on investment over 90 days.

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

Jilin Chemical Fibre  vs.  Linewell Software Co

Jilin Chemical Fibre

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Linewell Software

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jilin Chemical and Linewell Software

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

The idea behind Jilin Chemical Fibre and Linewell Software 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.