Correlation Between Changzhou Almaden and Jiangsu Pacific

Can any of the company-specific risk be diversified away by investing in both Changzhou Almaden and Jiangsu Pacific 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 Changzhou Almaden and Jiangsu Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changzhou Almaden Co and Jiangsu Pacific Quartz, you can compare the effects of market volatilities on Changzhou Almaden and Jiangsu Pacific 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 Changzhou Almaden with a short position of Jiangsu Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Almaden and Jiangsu Pacific.

Diversification Opportunities for Changzhou Almaden and Jiangsu Pacific

0.86

Correlation Coefficient

Changzhou Almaden  Jiangsu Pacific

Very poor diversification

The 3 months correlation between Changzhou and Jiangsu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and Jiangsu Pacific Quartz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Pacific Quartz and Changzhou Almaden 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 Changzhou Almaden Co are associated (or correlated) with Jiangsu Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Pacific Quartz has no effect on the direction of Changzhou Almaden i.e., Changzhou Almaden and Jiangsu Pacific go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Jiangsu Pacific

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to generate 0.94 times more return on investment than Jiangsu Pacific. However, Changzhou Almaden Co is 1.07 times less risky than Jiangsu Pacific. It trades about -0.07 of its potential returns per unit of risk. Jiangsu Pacific Quartz is currently generating about -0.08 per unit of risk. If you would invest  1,691  in Changzhou Almaden Co on October 22, 2024 and sell it today you would lose (198.00) from holding Changzhou Almaden Co or give up 11.71% of portfolio value over 90 days.

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

Changzhou Almaden Co  vs.  Jiangsu Pacific Quartz

Changzhou Almaden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changzhou Almaden Co 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.

Jiangsu Pacific Quartz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Pacific Quartz 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.

Pair Trading with Changzhou Almaden and Jiangsu Pacific

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

The idea behind Changzhou Almaden Co and Jiangsu Pacific Quartz 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.