Correlation Between Jiangsu Yanghe and CIMC Vehicles

Can any of the company-specific risk be diversified away by investing in both Jiangsu Yanghe and CIMC Vehicles 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 Jiangsu Yanghe and CIMC Vehicles into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Yanghe Brewery and CIMC Vehicles Co, you can compare the effects of market volatilities on Jiangsu Yanghe and CIMC Vehicles 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 Jiangsu Yanghe with a short position of CIMC Vehicles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Yanghe and CIMC Vehicles.

Diversification Opportunities for Jiangsu Yanghe and CIMC Vehicles

0.92

Correlation Coefficient

Jiangsu Yanghe  CIMC Vehicles

Almost no diversification

The 3 months correlation between Jiangsu and CIMC is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yanghe Brewery and CIMC Vehicles Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMC Vehicles and Jiangsu Yanghe 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 Jiangsu Yanghe Brewery are associated (or correlated) with CIMC Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMC Vehicles has no effect on the direction of Jiangsu Yanghe i.e., Jiangsu Yanghe and CIMC Vehicles go up and down completely randomly.

Pair Corralation between Jiangsu Yanghe and CIMC Vehicles

Assuming the 90 days trading horizon Jiangsu Yanghe Brewery is expected to under-perform the CIMC Vehicles. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Yanghe Brewery is 1.53 times less risky than CIMC Vehicles. The stock trades about -0.05 of its potential returns per unit of risk. The CIMC Vehicles Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  768.00  in CIMC Vehicles Co on September 22, 2024 and sell it today you would earn a total of  172.00  from holding CIMC Vehicles Co or generate 22.4% return on investment over 90 days.

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

Jiangsu Yanghe Brewery  vs.  CIMC Vehicles Co

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yanghe Brewery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yanghe sustained solid returns over the last few months and may actually be approaching a breakup point.

CIMC Vehicles

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CIMC Vehicles Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CIMC Vehicles may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jiangsu Yanghe and CIMC Vehicles

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

The idea behind Jiangsu Yanghe Brewery and CIMC Vehicles Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.