Correlation Between Jiangxi Hengda and Sanxiang Advanced

Can any of the company-specific risk be diversified away by investing in both Jiangxi Hengda and Sanxiang Advanced 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 Sanxiang Advanced 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 Sanxiang Advanced Materials, you can compare the effects of market volatilities on Jiangxi Hengda and Sanxiang Advanced 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 Sanxiang Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi Hengda and Sanxiang Advanced.

Diversification Opportunities for Jiangxi Hengda and Sanxiang Advanced

0.25

Correlation Coefficient

Jiangxi Hengda  Sanxiang Advanced

Modest diversification

The 3 months correlation between Jiangxi and Sanxiang is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Hengda Hi Tech and Sanxiang Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanxiang Advanced 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 Sanxiang Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanxiang Advanced has no effect on the direction of Jiangxi Hengda i.e., Jiangxi Hengda and Sanxiang Advanced go up and down completely randomly.

Pair Corralation between Jiangxi Hengda and Sanxiang Advanced

Assuming the 90 days trading horizon Jiangxi Hengda is expected to generate 2.12 times less return on investment than Sanxiang Advanced. In addition to that, Jiangxi Hengda is 1.07 times more volatile than Sanxiang Advanced Materials. It trades about 0.04 of its total potential returns per unit of risk. Sanxiang Advanced Materials is currently generating about 0.09 per unit of volatility. If you would invest  1,519  in Sanxiang Advanced Materials on October 11, 2024 and sell it today you would earn a total of  260.00  from holding Sanxiang Advanced Materials or generate 17.12% return on investment over 90 days.

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

Jiangxi Hengda Hi Tech  vs.  Sanxiang Advanced Materials

Jiangxi Hengda Hi

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Hengda Hi Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Hengda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sanxiang Advanced

Risk-Adjusted Performance

7 of 100

Modest

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

Pair Trading with Jiangxi Hengda and Sanxiang Advanced

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

The idea behind Jiangxi Hengda Hi Tech and Sanxiang Advanced Materials 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.