Correlation Between China Longyuan and Guangdong Jinma

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

Diversification Opportunities for China Longyuan and Guangdong Jinma

ChinaGuangdongDiversified AwayChinaGuangdongDiversified Away100%
0.45
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between China Longyuan and Guangdong Jinma

Assuming the 90 days trading horizon China Longyuan Power is expected to generate 0.69 times more return on investment than Guangdong Jinma. However, China Longyuan Power is 1.45 times less risky than Guangdong Jinma. It trades about -0.34 of its potential returns per unit of risk. Guangdong Jinma Entertainment is currently generating about -0.38 per unit of risk. If you would invest  1,686  in China Longyuan Power on October 6, 2024 and sell it today you would lose (205.00) from holding China Longyuan Power or give up 12.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

China Longyuan Power  vs.  Guangdong Jinma Entertainment

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 5101520253035
JavaScript chart by amCharts 3.21.15001289 300756
       Timeline  
China Longyuan Power 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China Longyuan Power 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1515.51616.51717.51818.51919.5
Guangdong Jinma Ente 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guangdong Jinma Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1314151617

China Longyuan and Guangdong Jinma Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.67-3.52-2.37-1.23-0.07781.02.073.154.225.29 0.0200.0250.0300.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15001289 300756
       Returns  

Pair Trading with China Longyuan and Guangdong Jinma

The main advantage of trading using opposite China Longyuan and Guangdong Jinma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Longyuan position performs unexpectedly, Guangdong Jinma 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 Guangdong Jinma will offset losses from the drop in Guangdong Jinma's long position.
The idea behind China Longyuan Power and Guangdong Jinma Entertainment 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.
Check out your portfolio center.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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