Correlation Between Jinhe Biotechnology and Kangping Technology

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and Kangping Technology 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 Jinhe Biotechnology and Kangping Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhe Biotechnology Co and Kangping Technology Co, you can compare the effects of market volatilities on Jinhe Biotechnology and Kangping Technology 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 Jinhe Biotechnology with a short position of Kangping Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and Kangping Technology.

Diversification Opportunities for Jinhe Biotechnology and Kangping Technology

0.71

Correlation Coefficient

Jinhe Biotechnology  Kangping Technology

Poor diversification

The 3 months correlation between Jinhe and Kangping is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Kangping Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangping Technology and Jinhe Biotechnology 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 Jinhe Biotechnology Co are associated (or correlated) with Kangping Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangping Technology has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Kangping Technology go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Kangping Technology

Assuming the 90 days trading horizon Jinhe Biotechnology Co is expected to under-perform the Kangping Technology. But the stock apears to be less risky and, when comparing its historical volatility, Jinhe Biotechnology Co is 1.4 times less risky than Kangping Technology. The stock trades about 0.0 of its potential returns per unit of risk. The Kangping Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,920  in Kangping Technology Co on December 4, 2024 and sell it today you would earn a total of  361.00  from holding Kangping Technology Co or generate 18.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Jinhe Biotechnology Co  vs.  Kangping Technology Co

Jinhe Biotechnology

Risk-Adjusted Performance

Very Weak

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

Kangping Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jinhe Biotechnology and Kangping Technology

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

The idea behind Jinhe Biotechnology Co and Kangping Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.