Correlation Between Henan Shenhuo and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both Henan Shenhuo and Jiangyin Jianghua 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 Henan Shenhuo and Jiangyin Jianghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henan Shenhuo Coal and Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on Henan Shenhuo and Jiangyin Jianghua 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 Henan Shenhuo with a short position of Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shenhuo and Jiangyin Jianghua.

Diversification Opportunities for Henan Shenhuo and Jiangyin Jianghua

-0.38

Correlation Coefficient

Henan Shenhuo  Jiangyin Jianghua

Very good diversification

The 3 months correlation between Henan and Jiangyin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shenhuo Coal and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and Henan Shenhuo 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 Henan Shenhuo Coal are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Henan Shenhuo i.e., Henan Shenhuo and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Henan Shenhuo and Jiangyin Jianghua

Assuming the 90 days trading horizon Henan Shenhuo Coal is expected to generate 1.05 times more return on investment than Jiangyin Jianghua. However, Henan Shenhuo is 1.05 times more volatile than Jiangyin Jianghua Microelectronics. It trades about 0.22 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about 0.21 per unit of risk. If you would invest  1,731  in Henan Shenhuo Coal on December 11, 2024 and sell it today you would earn a total of  338.00  from holding Henan Shenhuo Coal or generate 19.53% return on investment over 90 days.

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

Henan Shenhuo Coal  vs.  Jiangyin Jianghua Microelectro

Henan Shenhuo Coal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shenhuo Coal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shenhuo sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangyin Jianghua

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Henan Shenhuo and Jiangyin Jianghua

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

The idea behind Henan Shenhuo Coal and Jiangyin Jianghua Microelectronics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .