Correlation Between Shaanxi Energy and Jiangsu Zhongtian

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

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

Diversification Opportunities for Shaanxi Energy and Jiangsu Zhongtian

0.05

Correlation Coefficient

Shaanxi Energy  Jiangsu Zhongtian

Significant diversification

The 3 months correlation between Shaanxi and Jiangsu is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Energy Investment and Jiangsu Zhongtian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Zhongtian and Shaanxi 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 Shaanxi Energy Investment 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 Shaanxi Energy i.e., Shaanxi Energy and Jiangsu Zhongtian go up and down completely randomly.

Pair Corralation between Shaanxi Energy and Jiangsu Zhongtian

Assuming the 90 days trading horizon Shaanxi Energy Investment is expected to generate 0.67 times more return on investment than Jiangsu Zhongtian. However, Shaanxi Energy Investment is 1.5 times less risky than Jiangsu Zhongtian. 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  945.00  in Shaanxi Energy Investment on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Shaanxi Energy Investment or generate 0.21% return on investment over 90 days.

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

Shaanxi Energy Investment  vs.  Jiangsu Zhongtian Technology

Shaanxi Energy Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shaanxi Energy Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Shaanxi Energy and Jiangsu Zhongtian

The main advantage of trading using opposite Shaanxi Energy and Jiangsu Zhongtian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaanxi Energy 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 Shaanxi Energy Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.