Correlation Between China Securities and Sailun Jinyu

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Can any of the company-specific risk be diversified away by investing in both China Securities and Sailun Jinyu 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 Securities and Sailun Jinyu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Securities 800 and Sailun Jinyu Group, you can compare the effects of market volatilities on China Securities and Sailun Jinyu 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 Securities with a short position of Sailun Jinyu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Securities and Sailun Jinyu.

Diversification Opportunities for China Securities and Sailun Jinyu

ChinaSailunDiversified AwayChinaSailunDiversified Away100%
0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and Sailun is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding China Securities 800 and Sailun Jinyu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sailun Jinyu Group and China Securities 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 Securities 800 are associated (or correlated) with Sailun Jinyu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sailun Jinyu Group has no effect on the direction of China Securities i.e., China Securities and Sailun Jinyu go up and down completely randomly.
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Pair Corralation between China Securities and Sailun Jinyu

Assuming the 90 days trading horizon China Securities 800 is expected to generate 1.02 times more return on investment than Sailun Jinyu. However, China Securities is 1.02 times more volatile than Sailun Jinyu Group. It trades about 0.17 of its potential returns per unit of risk. Sailun Jinyu Group is currently generating about 0.02 per unit of risk. If you would invest  341,692  in China Securities 800 on September 23, 2024 and sell it today you would earn a total of  83,962  from holding China Securities 800 or generate 24.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

China Securities 800  vs.  Sailun Jinyu Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520253035
JavaScript chart by amCharts 3.21.15000906 601058
       Timeline  

China Securities and Sailun Jinyu Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.76-5.06-3.37-1.670.02831.813.665.517.35 0.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15000906 601058
       Returns  

Pair Trading with China Securities and Sailun Jinyu

The main advantage of trading using opposite China Securities and Sailun Jinyu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Securities position performs unexpectedly, Sailun Jinyu 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 Sailun Jinyu will offset losses from the drop in Sailun Jinyu's long position.
The idea behind China Securities 800 and Sailun Jinyu Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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