Correlation Between Changchun and Shanghai Jinfeng

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

By analyzing existing cross correlation between Changchun UP Optotech and Shanghai Jinfeng Wine, you can compare the effects of market volatilities on Changchun and Shanghai Jinfeng 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 Changchun with a short position of Shanghai Jinfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and Shanghai Jinfeng.

Diversification Opportunities for Changchun and Shanghai Jinfeng

0.37

Correlation Coefficient

Changchun  Shanghai Jinfeng

Weak diversification

The 3 months correlation between Changchun and Shanghai is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and Shanghai Jinfeng Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jinfeng Wine and Changchun 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 Changchun UP Optotech are associated (or correlated) with Shanghai Jinfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jinfeng Wine has no effect on the direction of Changchun i.e., Changchun and Shanghai Jinfeng go up and down completely randomly.

Pair Corralation between Changchun and Shanghai Jinfeng

Assuming the 90 days trading horizon Changchun UP Optotech is expected to under-perform the Shanghai Jinfeng. But the stock apears to be less risky and, when comparing its historical volatility, Changchun UP Optotech is 2.13 times less risky than Shanghai Jinfeng. The stock trades about -0.31 of its potential returns per unit of risk. The Shanghai Jinfeng Wine is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  601.00  in Shanghai Jinfeng Wine on October 11, 2024 and sell it today you would lose (77.00) from holding Shanghai Jinfeng Wine or give up 12.81% of portfolio value over 90 days.

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

Changchun UP Optotech  vs.  Shanghai Jinfeng Wine

Changchun UP Optotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Jinfeng Wine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jinfeng Wine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Jinfeng may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Changchun and Shanghai Jinfeng

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

The idea behind Changchun UP Optotech and Shanghai Jinfeng Wine 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.