Correlation Between Zhejiang JIULI and Yantai Jereh

Can any of the company-specific risk be diversified away by investing in both Zhejiang JIULI and Yantai Jereh 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 Zhejiang JIULI and Yantai Jereh into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang JIULI Hi tech and Yantai Jereh Oilfield, you can compare the effects of market volatilities on Zhejiang JIULI and Yantai Jereh 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 Zhejiang JIULI with a short position of Yantai Jereh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang JIULI and Yantai Jereh.

Diversification Opportunities for Zhejiang JIULI and Yantai Jereh

0.74

Correlation Coefficient

Zhejiang JIULI  Yantai Jereh

Poor diversification

The 3 months correlation between Zhejiang and Yantai is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang JIULI Hi tech and Yantai Jereh Oilfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai Jereh Oilfield and Zhejiang JIULI 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 Zhejiang JIULI Hi tech are associated (or correlated) with Yantai Jereh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai Jereh Oilfield has no effect on the direction of Zhejiang JIULI i.e., Zhejiang JIULI and Yantai Jereh go up and down completely randomly.

Pair Corralation between Zhejiang JIULI and Yantai Jereh

Assuming the 90 days trading horizon Zhejiang JIULI is expected to generate 1.08 times less return on investment than Yantai Jereh. But when comparing it to its historical volatility, Zhejiang JIULI Hi tech is 1.75 times less risky than Yantai Jereh. It trades about 0.09 of its potential returns per unit of risk. Yantai Jereh Oilfield is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Yantai Jereh Oilfield on December 26, 2024 and sell it today you would earn a total of  232.00  from holding Yantai Jereh Oilfield or generate 6.63% return on investment over 90 days.

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

Zhejiang JIULI Hi tech  vs.  Yantai Jereh Oilfield

Zhejiang JIULI Hi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang JIULI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Yantai Jereh Oilfield

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai Jereh Oilfield are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai Jereh may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zhejiang JIULI and Yantai Jereh

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

The idea behind Zhejiang JIULI Hi tech and Yantai Jereh Oilfield 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..