Correlation Between Jiangxi Hengda and Xinya Electronic

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

Diversification Opportunities for Jiangxi Hengda and Xinya Electronic

0.36

Correlation Coefficient

Jiangxi Hengda  Xinya Electronic

Weak diversification

The 3 months correlation between Jiangxi and Xinya is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Hengda Hi Tech and Xinya Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinya Electronic 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 Xinya Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinya Electronic has no effect on the direction of Jiangxi Hengda i.e., Jiangxi Hengda and Xinya Electronic go up and down completely randomly.

Pair Corralation between Jiangxi Hengda and Xinya Electronic

Assuming the 90 days trading horizon Jiangxi Hengda is expected to generate 2.21 times less return on investment than Xinya Electronic. In addition to that, Jiangxi Hengda is 1.09 times more volatile than Xinya Electronic Co. It trades about 0.04 of its total potential returns per unit of risk. Xinya Electronic Co is currently generating about 0.1 per unit of volatility. If you would invest  1,239  in Xinya Electronic Co on October 11, 2024 and sell it today you would earn a total of  225.00  from holding Xinya Electronic Co or generate 18.16% 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.  Xinya Electronic Co

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.

Xinya Electronic

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Jiangxi Hengda and Xinya Electronic

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

The idea behind Jiangxi Hengda Hi Tech and Xinya Electronic Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.