Correlation Between Chengdu Xinzhu and Jinsanjiang (Zhaoqing)

Can any of the company-specific risk be diversified away by investing in both Chengdu Xinzhu and Jinsanjiang (Zhaoqing) 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 Chengdu Xinzhu and Jinsanjiang (Zhaoqing) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu Xinzhu RoadBridge and Jinsanjiang Silicon Material, you can compare the effects of market volatilities on Chengdu Xinzhu and Jinsanjiang (Zhaoqing) 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 Chengdu Xinzhu with a short position of Jinsanjiang (Zhaoqing). Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xinzhu and Jinsanjiang (Zhaoqing).

Diversification Opportunities for Chengdu Xinzhu and Jinsanjiang (Zhaoqing)

-0.1

Correlation Coefficient

Chengdu Xinzhu  Jinsanjiang (Zhaoqing)

Good diversification

The 3 months correlation between Chengdu and Jinsanjiang is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xinzhu RoadBridge and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang (Zhaoqing) and Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge are associated (or correlated) with Jinsanjiang (Zhaoqing). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang (Zhaoqing) has no effect on the direction of Chengdu Xinzhu i.e., Chengdu Xinzhu and Jinsanjiang (Zhaoqing) go up and down completely randomly.

Pair Corralation between Chengdu Xinzhu and Jinsanjiang (Zhaoqing)

Assuming the 90 days trading horizon Chengdu Xinzhu RoadBridge is expected to under-perform the Jinsanjiang (Zhaoqing). In addition to that, Chengdu Xinzhu is 1.11 times more volatile than Jinsanjiang Silicon Material. It trades about 0.0 of its total potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about 0.16 per unit of volatility. If you would invest  981.00  in Jinsanjiang Silicon Material on December 11, 2024 and sell it today you would earn a total of  122.00  from holding Jinsanjiang Silicon Material or generate 12.44% return on investment over 90 days.

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

Chengdu Xinzhu RoadBridge  vs.  Jinsanjiang Silicon Material

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chengdu Xinzhu RoadBridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jinsanjiang (Zhaoqing)

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chengdu Xinzhu and Jinsanjiang (Zhaoqing)

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

The idea behind Chengdu Xinzhu RoadBridge and Jinsanjiang Silicon Material 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.