Correlation Between Guangdong Jingyi and Fujian Newland

Can any of the company-specific risk be diversified away by investing in both Guangdong Jingyi and Fujian Newland 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 Guangdong Jingyi and Fujian Newland into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Jingyi Metal and Fujian Newland Computer, you can compare the effects of market volatilities on Guangdong Jingyi and Fujian Newland 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 Guangdong Jingyi with a short position of Fujian Newland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and Fujian Newland.

Diversification Opportunities for Guangdong Jingyi and Fujian Newland

0.95

Correlation Coefficient

Guangdong Jingyi  Fujian Newland

Almost no diversification

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

Pair Corralation between Guangdong Jingyi and Fujian Newland

Assuming the 90 days trading horizon Guangdong Jingyi is expected to generate 3.0 times less return on investment than Fujian Newland. In addition to that, Guangdong Jingyi is 1.06 times more volatile than Fujian Newland Computer. It trades about 0.02 of its total potential returns per unit of risk. Fujian Newland Computer is currently generating about 0.05 per unit of volatility. If you would invest  1,306  in Fujian Newland Computer on September 26, 2024 and sell it today you would earn a total of  751.00  from holding Fujian Newland Computer or generate 57.5% return on investment over 90 days.

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

Guangdong Jingyi Metal  vs.  Fujian Newland Computer

Guangdong Jingyi Metal

Risk-Adjusted Performance

12 of 100

Good

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

Fujian Newland Computer

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Guangdong Jingyi and Fujian Newland

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

The idea behind Guangdong Jingyi Metal and Fujian Newland Computer 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.