Correlation Between Zhejiang JIULI and National Silicon

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

Diversification Opportunities for Zhejiang JIULI and National Silicon

-0.55

Correlation Coefficient

Zhejiang JIULI  National Silicon

Excellent diversification

The 3 months correlation between Zhejiang and National is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang JIULI Hi tech and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry 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 National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Zhejiang JIULI i.e., Zhejiang JIULI and National Silicon go up and down completely randomly.

Pair Corralation between Zhejiang JIULI and National Silicon

Assuming the 90 days trading horizon Zhejiang JIULI Hi tech is expected to generate 0.49 times more return on investment than National Silicon. However, Zhejiang JIULI Hi tech is 2.04 times less risky than National Silicon. It trades about 0.07 of its potential returns per unit of risk. National Silicon Industry is currently generating about -0.01 per unit of risk. If you would invest  2,361  in Zhejiang JIULI Hi tech on December 26, 2024 and sell it today you would earn a total of  133.00  from holding Zhejiang JIULI Hi tech or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Zhejiang JIULI Hi tech  vs.  National Silicon Industry

Zhejiang JIULI Hi

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 5 (%) 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.

National Silicon Industry

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhejiang JIULI and National Silicon

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

The idea behind Zhejiang JIULI Hi tech and National Silicon Industry 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.