Correlation Between Jizhong Energy and AUPU Home

Can any of the company-specific risk be diversified away by investing in both Jizhong Energy and AUPU Home 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 Jizhong Energy and AUPU Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jizhong Energy Resources and AUPU Home Style, you can compare the effects of market volatilities on Jizhong Energy and AUPU Home 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 Jizhong Energy with a short position of AUPU Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jizhong Energy and AUPU Home.

Diversification Opportunities for Jizhong Energy and AUPU Home

0.73

Correlation Coefficient

Jizhong Energy  AUPU Home

Poor diversification

The 3 months correlation between Jizhong and AUPU is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Jizhong Energy Resources and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style and Jizhong Energy 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 Jizhong Energy Resources are associated (or correlated) with AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of Jizhong Energy i.e., Jizhong Energy and AUPU Home go up and down completely randomly.

Pair Corralation between Jizhong Energy and AUPU Home

Assuming the 90 days trading horizon Jizhong Energy Resources is expected to under-perform the AUPU Home. But the stock apears to be less risky and, when comparing its historical volatility, Jizhong Energy Resources is 1.31 times less risky than AUPU Home. The stock trades about -0.06 of its potential returns per unit of risk. The AUPU Home Style is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,067  in AUPU Home Style on October 25, 2024 and sell it today you would lose (1.00) from holding AUPU Home Style or give up 0.09% of portfolio value over 90 days.

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

Jizhong Energy Resources  vs.  AUPU Home Style

Jizhong Energy Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

AUPU Home Style

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jizhong Energy and AUPU Home

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

The idea behind Jizhong Energy Resources and AUPU Home Style 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.