Correlation Between Jiangnan Mould and China Building

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

By analyzing existing cross correlation between Jiangnan Mould Plastic and China Building Material, you can compare the effects of market volatilities on Jiangnan Mould and China Building 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 Jiangnan Mould with a short position of China Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangnan Mould and China Building.

Diversification Opportunities for Jiangnan Mould and China Building

0.76

Correlation Coefficient

Jiangnan Mould  China Building

Poor diversification

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

Pair Corralation between Jiangnan Mould and China Building

Assuming the 90 days trading horizon Jiangnan Mould Plastic is expected to generate 0.93 times more return on investment than China Building. However, Jiangnan Mould Plastic is 1.08 times less risky than China Building. It trades about 0.05 of its potential returns per unit of risk. China Building Material is currently generating about 0.02 per unit of risk. If you would invest  630.00  in Jiangnan Mould Plastic on October 12, 2024 and sell it today you would earn a total of  45.00  from holding Jiangnan Mould Plastic or generate 7.14% return on investment over 90 days.

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

Jiangnan Mould Plastic  vs.  China Building Material

Jiangnan Mould Plastic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangnan Mould Plastic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangnan Mould may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Building Material

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Building Material are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Building is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangnan Mould and China Building

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

The idea behind Jiangnan Mould Plastic and China Building Material 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.