Correlation Between Xinxiang Chemical and Jiangsu Zhongtian

Can any of the company-specific risk be diversified away by investing in both Xinxiang Chemical and Jiangsu Zhongtian 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 Xinxiang Chemical and Jiangsu Zhongtian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinxiang Chemical Fiber and Jiangsu Zhongtian Technology, you can compare the effects of market volatilities on Xinxiang Chemical and Jiangsu Zhongtian 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 Xinxiang Chemical with a short position of Jiangsu Zhongtian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinxiang Chemical and Jiangsu Zhongtian.

Diversification Opportunities for Xinxiang Chemical and Jiangsu Zhongtian

0.45

Correlation Coefficient

Xinxiang Chemical  Jiangsu Zhongtian

Very weak diversification

The 3 months correlation between Xinxiang and Jiangsu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Xinxiang Chemical Fiber and Jiangsu Zhongtian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Zhongtian and Xinxiang Chemical 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 Xinxiang Chemical Fiber are associated (or correlated) with Jiangsu Zhongtian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Zhongtian has no effect on the direction of Xinxiang Chemical i.e., Xinxiang Chemical and Jiangsu Zhongtian go up and down completely randomly.

Pair Corralation between Xinxiang Chemical and Jiangsu Zhongtian

Assuming the 90 days trading horizon Xinxiang Chemical Fiber is expected to generate 2.96 times more return on investment than Jiangsu Zhongtian. However, Xinxiang Chemical is 2.96 times more volatile than Jiangsu Zhongtian Technology. It trades about 0.01 of its potential returns per unit of risk. Jiangsu Zhongtian Technology is currently generating about -0.3 per unit of risk. If you would invest  423.00  in Xinxiang Chemical Fiber on September 28, 2024 and sell it today you would lose (6.00) from holding Xinxiang Chemical Fiber or give up 1.42% of portfolio value over 90 days.

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

Xinxiang Chemical Fiber  vs.  Jiangsu Zhongtian Technology

Xinxiang Chemical Fiber

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinxiang Chemical Fiber are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinxiang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Zhongtian

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xinxiang Chemical and Jiangsu Zhongtian

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

The idea behind Xinxiang Chemical Fiber and Jiangsu Zhongtian Technology 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.