Correlation Between Shenyang Chemical and Jiangsu Jiangnan

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

By analyzing existing cross correlation between Shenyang Chemical Industry and Jiangsu Jiangnan Water, you can compare the effects of market volatilities on Shenyang Chemical and Jiangsu Jiangnan 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 Shenyang Chemical with a short position of Jiangsu Jiangnan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and Jiangsu Jiangnan.

Diversification Opportunities for Shenyang Chemical and Jiangsu Jiangnan

0.5

Correlation Coefficient

Shenyang Chemical  Jiangsu Jiangnan

Very weak diversification

The 3 months correlation between Shenyang and Jiangsu is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Jiangsu Jiangnan Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jiangnan Water and Shenyang 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 Shenyang Chemical Industry are associated (or correlated) with Jiangsu Jiangnan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jiangnan Water has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Jiangsu Jiangnan go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Jiangsu Jiangnan

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 1.73 times more return on investment than Jiangsu Jiangnan. However, Shenyang Chemical is 1.73 times more volatile than Jiangsu Jiangnan Water. It trades about -0.01 of its potential returns per unit of risk. Jiangsu Jiangnan Water is currently generating about -0.1 per unit of risk. If you would invest  334.00  in Shenyang Chemical Industry on October 8, 2024 and sell it today you would lose (18.00) from holding Shenyang Chemical Industry or give up 5.39% of portfolio value over 90 days.

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

Shenyang Chemical Industry  vs.  Jiangsu Jiangnan Water

Shenyang Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangsu Jiangnan Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Jiangnan Water 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 Shenyang Chemical and Jiangsu Jiangnan

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

The idea behind Shenyang Chemical Industry and Jiangsu Jiangnan Water 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.