Correlation Between Shenzhen Clou and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both Shenzhen Clou and Jiangyin Jianghua 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 Shenzhen Clou and Jiangyin Jianghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Clou Electronics and Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on Shenzhen Clou and Jiangyin Jianghua 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 Shenzhen Clou with a short position of Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Clou and Jiangyin Jianghua.

Diversification Opportunities for Shenzhen Clou and Jiangyin Jianghua

0.66

Correlation Coefficient

Shenzhen Clou  Jiangyin Jianghua

Poor diversification

The 3 months correlation between Shenzhen and Jiangyin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and Shenzhen Clou 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 Shenzhen Clou Electronics are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Shenzhen Clou and Jiangyin Jianghua

Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to under-perform the Jiangyin Jianghua. In addition to that, Shenzhen Clou is 1.06 times more volatile than Jiangyin Jianghua Microelectronics. It trades about -0.3 of its total potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about -0.17 per unit of volatility. If you would invest  1,771  in Jiangyin Jianghua Microelectronics on October 25, 2024 and sell it today you would lose (156.00) from holding Jiangyin Jianghua Microelectronics or give up 8.81% of portfolio value over 90 days.

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

Shenzhen Clou Electronics  vs.  Jiangyin Jianghua Microelectro

Shenzhen Clou Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangyin Jianghua

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangyin Jianghua Microelectronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangyin Jianghua may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Clou and Jiangyin Jianghua

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

The idea behind Shenzhen Clou Electronics and Jiangyin Jianghua Microelectronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.