Correlation Between Jiaozuo Wanfang and Jilin Chemical

Can any of the company-specific risk be diversified away by investing in both Jiaozuo Wanfang and Jilin Chemical 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 Jiaozuo Wanfang and Jilin Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiaozuo Wanfang Aluminum and Jilin Chemical Fibre, you can compare the effects of market volatilities on Jiaozuo Wanfang and Jilin Chemical 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 Jiaozuo Wanfang with a short position of Jilin Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiaozuo Wanfang and Jilin Chemical.

Diversification Opportunities for Jiaozuo Wanfang and Jilin Chemical

0.37

Correlation Coefficient

Jiaozuo Wanfang  Jilin Chemical

Weak diversification

The 3 months correlation between Jiaozuo and Jilin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Jiaozuo Wanfang Aluminum and Jilin Chemical Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Chemical Fibre and Jiaozuo Wanfang 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 Jiaozuo Wanfang Aluminum are associated (or correlated) with Jilin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Chemical Fibre has no effect on the direction of Jiaozuo Wanfang i.e., Jiaozuo Wanfang and Jilin Chemical go up and down completely randomly.

Pair Corralation between Jiaozuo Wanfang and Jilin Chemical

Assuming the 90 days trading horizon Jiaozuo Wanfang is expected to generate 1.01 times less return on investment than Jilin Chemical. But when comparing it to its historical volatility, Jiaozuo Wanfang Aluminum is 1.04 times less risky than Jilin Chemical. It trades about 0.04 of its potential returns per unit of risk. Jilin Chemical Fibre is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  284.00  in Jilin Chemical Fibre on October 6, 2024 and sell it today you would earn a total of  53.00  from holding Jilin Chemical Fibre or generate 18.66% return on investment over 90 days.

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

Jiaozuo Wanfang Aluminum  vs.  Jilin Chemical Fibre

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiaozuo Wanfang Aluminum 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.

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.

Pair Trading with Jiaozuo Wanfang and Jilin Chemical

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

The idea behind Jiaozuo Wanfang Aluminum and Jilin Chemical Fibre 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.