Correlation Between China Merchants and Jonjee Hi

Can any of the company-specific risk be diversified away by investing in both China Merchants and Jonjee Hi 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 Merchants and Jonjee Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Merchants Shekou and Jonjee Hi tech Industrial, you can compare the effects of market volatilities on China Merchants and Jonjee Hi 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 Merchants with a short position of Jonjee Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Jonjee Hi.

Diversification Opportunities for China Merchants and Jonjee Hi

0.95

Correlation Coefficient

China Merchants  Jonjee Hi

Almost no diversification

The 3 months correlation between China and Jonjee is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Shekou and Jonjee Hi tech Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonjee Hi tech and China Merchants 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 Merchants Shekou are associated (or correlated) with Jonjee Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonjee Hi tech has no effect on the direction of China Merchants i.e., China Merchants and Jonjee Hi go up and down completely randomly.

Pair Corralation between China Merchants and Jonjee Hi

Assuming the 90 days trading horizon China Merchants Shekou is expected to generate 0.97 times more return on investment than Jonjee Hi. However, China Merchants Shekou is 1.04 times less risky than Jonjee Hi. It trades about 0.05 of its potential returns per unit of risk. Jonjee Hi tech Industrial is currently generating about 0.04 per unit of risk. If you would invest  1,158  in China Merchants Shekou on September 5, 2024 and sell it today you would earn a total of  27.00  from holding China Merchants Shekou or generate 2.33% return on investment over 90 days.

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

China Merchants Shekou  vs.  Jonjee Hi tech Industrial

China Merchants Shekou

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Shekou are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Merchants sustained solid returns over the last few months and may actually be approaching a breakup point.

Jonjee Hi tech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jonjee Hi tech Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jonjee Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Merchants and Jonjee Hi

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

The idea behind China Merchants Shekou and Jonjee Hi tech Industrial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.