Correlation Between Xinjiang Zhongtai and Jilin Chemical

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

By analyzing existing cross correlation between Xinjiang Zhongtai Chemical and Jilin Chemical Fibre, you can compare the effects of market volatilities on Xinjiang Zhongtai and Jilin Chemical 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 Xinjiang Zhongtai with a short position of Jilin Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Zhongtai and Jilin Chemical.

Diversification Opportunities for Xinjiang Zhongtai and Jilin Chemical

0.59

Correlation Coefficient

Xinjiang Zhongtai  Jilin Chemical

Very weak diversification

The 3 months correlation between Xinjiang and Jilin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Zhongtai Chemical and Jilin Chemical Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Chemical Fibre and Xinjiang Zhongtai 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 Xinjiang Zhongtai Chemical are associated (or correlated) with Jilin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Chemical Fibre has no effect on the direction of Xinjiang Zhongtai i.e., Xinjiang Zhongtai and Jilin Chemical go up and down completely randomly.

Pair Corralation between Xinjiang Zhongtai and Jilin Chemical

Assuming the 90 days trading horizon Xinjiang Zhongtai Chemical is expected to under-perform the Jilin Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Xinjiang Zhongtai Chemical is 2.17 times less risky than Jilin Chemical. The stock trades about -0.06 of its potential returns per unit of risk. The Jilin Chemical Fibre is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  395.00  in Jilin Chemical Fibre on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Jilin Chemical Fibre or generate 0.76% return on investment over 90 days.

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

Xinjiang Zhongtai Chemical  vs.  Jilin Chemical Fibre

Xinjiang Zhongtai

Risk-Adjusted Performance

Very Weak

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

Jilin Chemical Fibre

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jilin Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xinjiang Zhongtai and Jilin Chemical

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

The idea behind Xinjiang Zhongtai Chemical and Jilin Chemical Fibre 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.