Correlation Between Jiugui Liquor and Zhejiang Construction

Can any of the company-specific risk be diversified away by investing in both Jiugui Liquor and Zhejiang Construction 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 Zhejiang Construction 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 Zhejiang Construction Investment, you can compare the effects of market volatilities on Jiugui Liquor and Zhejiang Construction 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 Zhejiang Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Zhejiang Construction.

Diversification Opportunities for Jiugui Liquor and Zhejiang Construction

0.78

Correlation Coefficient

Jiugui Liquor  Zhejiang Construction

Poor diversification

The 3 months correlation between Jiugui and Zhejiang is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction 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 Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Zhejiang Construction go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Zhejiang Construction

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to generate 0.66 times more return on investment than Zhejiang Construction. However, Jiugui Liquor Co is 1.5 times less risky than Zhejiang Construction. It trades about 0.0 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about -0.35 per unit of risk. If you would invest  5,665  in Jiugui Liquor Co on September 25, 2024 and sell it today you would lose (35.00) from holding Jiugui Liquor Co or give up 0.62% 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.  Zhejiang Construction Investme

Jiugui Liquor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Construction

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Construction Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiugui Liquor and Zhejiang Construction

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

The idea behind Jiugui Liquor Co and Zhejiang Construction Investment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.