Correlation Between Jiangxi Hengda and Everdisplay Optronics

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

Diversification Opportunities for Jiangxi Hengda and Everdisplay Optronics

0.69

Correlation Coefficient

Jiangxi Hengda  Everdisplay Optronics

Poor diversification

The 3 months correlation between Jiangxi and Everdisplay is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Hengda Hi Tech and Everdisplay Optronics Shanghai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everdisplay Optronics 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 Everdisplay Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everdisplay Optronics has no effect on the direction of Jiangxi Hengda i.e., Jiangxi Hengda and Everdisplay Optronics go up and down completely randomly.

Pair Corralation between Jiangxi Hengda and Everdisplay Optronics

Assuming the 90 days trading horizon Jiangxi Hengda Hi Tech is expected to generate 1.74 times more return on investment than Everdisplay Optronics. However, Jiangxi Hengda is 1.74 times more volatile than Everdisplay Optronics Shanghai. It trades about 0.03 of its potential returns per unit of risk. Everdisplay Optronics Shanghai is currently generating about -0.03 per unit of risk. If you would invest  495.00  in Jiangxi Hengda Hi Tech on October 20, 2024 and sell it today you would earn a total of  11.00  from holding Jiangxi Hengda Hi Tech or generate 2.22% return on investment over 90 days.

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

Jiangxi Hengda Hi Tech  vs.  Everdisplay Optronics Shanghai

Jiangxi Hengda Hi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Hengda Hi Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangxi Hengda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Everdisplay Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jiangxi Hengda and Everdisplay Optronics

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

The idea behind Jiangxi Hengda Hi Tech and Everdisplay Optronics Shanghai 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 Transaction History module to view history of all your transactions and understand their impact on performance.