Correlation Between Jiugui Liquor and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Jiugui Liquor and Xiandai Investment 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 Jiugui Liquor and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiugui Liquor Co and Xiandai Investment Co, you can compare the effects of market volatilities on Jiugui Liquor and Xiandai Investment 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 Jiugui Liquor with a short position of Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Xiandai Investment.

Diversification Opportunities for Jiugui Liquor and Xiandai Investment

0.65

Correlation Coefficient

Jiugui Liquor  Xiandai Investment

Poor diversification

The 3 months correlation between Jiugui and Xiandai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and Jiugui Liquor 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 Jiugui Liquor Co are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Xiandai Investment go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Xiandai Investment

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Xiandai Investment. In addition to that, Jiugui Liquor is 1.39 times more volatile than Xiandai Investment Co. It trades about -0.35 of its total potential returns per unit of risk. Xiandai Investment Co is currently generating about -0.33 per unit of volatility. If you would invest  472.00  in Xiandai Investment Co on October 7, 2024 and sell it today you would lose (53.00) from holding Xiandai Investment Co or give up 11.23% of portfolio value over 90 days.

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

Jiugui Liquor Co  vs.  Xiandai Investment Co

Jiugui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiugui Liquor Co 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.

Xiandai Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jiugui Liquor and Xiandai Investment

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

The idea behind Jiugui Liquor Co and Xiandai Investment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.