Correlation Between China Minmetals and Jilin Jlu

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

By analyzing existing cross correlation between China Minmetals Rare and Jilin Jlu Communication, you can compare the effects of market volatilities on China Minmetals and Jilin Jlu 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 China Minmetals with a short position of Jilin Jlu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minmetals and Jilin Jlu.

Diversification Opportunities for China Minmetals and Jilin Jlu

0.39

Correlation Coefficient

China Minmetals  Jilin Jlu

Weak diversification

The 3 months correlation between China and Jilin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu Communication and China Minmetals 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 China Minmetals Rare are associated (or correlated) with Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of China Minmetals i.e., China Minmetals and Jilin Jlu go up and down completely randomly.

Pair Corralation between China Minmetals and Jilin Jlu

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the Jilin Jlu. But the stock apears to be less risky and, when comparing its historical volatility, China Minmetals Rare is 1.19 times less risky than Jilin Jlu. The stock trades about -0.02 of its potential returns per unit of risk. The Jilin Jlu Communication is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  898.00  in Jilin Jlu Communication on October 25, 2024 and sell it today you would lose (52.00) from holding Jilin Jlu Communication or give up 5.79% of portfolio value over 90 days.

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

China Minmetals Rare  vs.  Jilin Jlu Communication

China Minmetals Rare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jilin Jlu Communication

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Minmetals and Jilin Jlu

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

The idea behind China Minmetals Rare and Jilin Jlu Communication 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.