Correlation Between Jiangxi Hengda and Sichuan Jinshi

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

By analyzing existing cross correlation between Jiangxi Hengda Hi Tech and Sichuan Jinshi Technology, you can compare the effects of market volatilities on Jiangxi Hengda and Sichuan Jinshi 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 Jiangxi Hengda with a short position of Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi Hengda and Sichuan Jinshi.

Diversification Opportunities for Jiangxi Hengda and Sichuan Jinshi

0.6

Correlation Coefficient

Jiangxi Hengda  Sichuan Jinshi

Poor diversification

The 3 months correlation between Jiangxi and Sichuan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Hengda Hi Tech and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and Jiangxi Hengda 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 Jiangxi Hengda Hi Tech are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Jiangxi Hengda i.e., Jiangxi Hengda and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Jiangxi Hengda and Sichuan Jinshi

Assuming the 90 days trading horizon Jiangxi Hengda Hi Tech is expected to generate 1.3 times more return on investment than Sichuan Jinshi. However, Jiangxi Hengda is 1.3 times more volatile than Sichuan Jinshi Technology. It trades about -0.05 of its potential returns per unit of risk. Sichuan Jinshi Technology is currently generating about -0.1 per unit of risk. If you would invest  593.00  in Jiangxi Hengda Hi Tech on December 1, 2024 and sell it today you would lose (69.00) from holding Jiangxi Hengda Hi Tech or give up 11.64% of portfolio value over 90 days.

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

Jiangxi Hengda Hi Tech  vs.  Sichuan Jinshi Technology

Jiangxi Hengda Hi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangxi Hengda Hi Tech 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.

Sichuan Jinshi Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Jinshi Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jiangxi Hengda and Sichuan Jinshi

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

The idea behind Jiangxi Hengda Hi Tech and Sichuan Jinshi Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.