Correlation Between Guangdong Jingyi and Zhejiang JIULI

Can any of the company-specific risk be diversified away by investing in both Guangdong Jingyi and Zhejiang JIULI 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 Zhejiang JIULI 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 Zhejiang JIULI Hi tech, you can compare the effects of market volatilities on Guangdong Jingyi and Zhejiang JIULI 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 Zhejiang JIULI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and Zhejiang JIULI.

Diversification Opportunities for Guangdong Jingyi and Zhejiang JIULI

0.69

Correlation Coefficient

Guangdong Jingyi  Zhejiang JIULI

Poor diversification

The 3 months correlation between Guangdong and Zhejiang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and Zhejiang JIULI Hi tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang JIULI Hi 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 Zhejiang JIULI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang JIULI Hi has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and Zhejiang JIULI go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and Zhejiang JIULI

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to under-perform the Zhejiang JIULI. In addition to that, Guangdong Jingyi is 2.05 times more volatile than Zhejiang JIULI Hi tech. It trades about -0.21 of its total potential returns per unit of risk. Zhejiang JIULI Hi tech is currently generating about -0.12 per unit of volatility. If you would invest  2,382  in Zhejiang JIULI Hi tech on October 5, 2024 and sell it today you would lose (85.00) from holding Zhejiang JIULI Hi tech or give up 3.57% of portfolio value over 90 days.

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

Guangdong Jingyi Metal  vs.  Zhejiang JIULI Hi tech

Guangdong Jingyi Metal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Jingyi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhejiang JIULI Hi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang JIULI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Jingyi and Zhejiang JIULI

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

The idea behind Guangdong Jingyi Metal and Zhejiang JIULI Hi tech 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.