Correlation Between Shandong Mining and Jiangsu Jinling

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

By analyzing existing cross correlation between Shandong Mining Machinery and Jiangsu Jinling Sports, you can compare the effects of market volatilities on Shandong Mining and Jiangsu Jinling 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 Shandong Mining with a short position of Jiangsu Jinling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Mining and Jiangsu Jinling.

Diversification Opportunities for Shandong Mining and Jiangsu Jinling

0.63

Correlation Coefficient

Shandong Mining  Jiangsu Jinling

Poor diversification

The 3 months correlation between Shandong and Jiangsu is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Jiangsu Jinling Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jinling Sports and Shandong Mining 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 Shandong Mining Machinery are associated (or correlated) with Jiangsu Jinling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jinling Sports has no effect on the direction of Shandong Mining i.e., Shandong Mining and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Shandong Mining and Jiangsu Jinling

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the Jiangsu Jinling. In addition to that, Shandong Mining is 1.44 times more volatile than Jiangsu Jinling Sports. It trades about -0.13 of its total potential returns per unit of risk. Jiangsu Jinling Sports is currently generating about -0.17 per unit of volatility. If you would invest  1,523  in Jiangsu Jinling Sports on October 4, 2024 and sell it today you would lose (259.00) from holding Jiangsu Jinling Sports or give up 17.01% of portfolio value over 90 days.

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

Shandong Mining Machinery  vs.  Jiangsu Jinling Sports

Shandong Mining Machinery

Risk-Adjusted Performance

7 of 100

OK

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

Jiangsu Jinling Sports

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Jinling Sports 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.

Pair Trading with Shandong Mining and Jiangsu Jinling

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

The idea behind Shandong Mining Machinery and Jiangsu Jinling Sports 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.