Correlation Between Shanghai Yaoji and Jiangnan Mould

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Can any of the company-specific risk be diversified away by investing in both Shanghai Yaoji and Jiangnan Mould 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 Shanghai Yaoji and Jiangnan Mould into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Yaoji Playing and Jiangnan Mould Plastic, you can compare the effects of market volatilities on Shanghai Yaoji and Jiangnan Mould 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 Shanghai Yaoji with a short position of Jiangnan Mould. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Yaoji and Jiangnan Mould.

Diversification Opportunities for Shanghai Yaoji and Jiangnan Mould

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Jiangnan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Jiangnan Mould Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangnan Mould Plastic and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Jiangnan Mould. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangnan Mould Plastic has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Jiangnan Mould go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Jiangnan Mould

Assuming the 90 days trading horizon Shanghai Yaoji Playing is expected to generate 1.28 times more return on investment than Jiangnan Mould. However, Shanghai Yaoji is 1.28 times more volatile than Jiangnan Mould Plastic. It trades about 0.04 of its potential returns per unit of risk. Jiangnan Mould Plastic is currently generating about 0.03 per unit of risk. If you would invest  2,073  in Shanghai Yaoji Playing on October 9, 2024 and sell it today you would earn a total of  386.00  from holding Shanghai Yaoji Playing or generate 18.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanghai Yaoji Playing  vs.  Jiangnan Mould Plastic

 Performance 
       Timeline  
Shanghai Yaoji Playing 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Yaoji is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Jiangnan Mould Plastic 

Risk-Adjusted Performance

2 of 100

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

Shanghai Yaoji and Jiangnan Mould Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Yaoji and Jiangnan Mould

The main advantage of trading using opposite Shanghai Yaoji and Jiangnan Mould positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Yaoji position performs unexpectedly, Jiangnan Mould 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 Jiangnan Mould will offset losses from the drop in Jiangnan Mould's long position.
The idea behind Shanghai Yaoji Playing and Jiangnan Mould Plastic 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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