Correlation Between Jinhe Biotechnology and Chongqing Road

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and Chongqing Road 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 Chongqing Road 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 Chongqing Road Bridge, you can compare the effects of market volatilities on Jinhe Biotechnology and Chongqing Road 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 Chongqing Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and Chongqing Road.

Diversification Opportunities for Jinhe Biotechnology and Chongqing Road

0.63

Correlation Coefficient

Jinhe Biotechnology  Chongqing Road

Poor diversification

The 3 months correlation between Jinhe and Chongqing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Chongqing Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Road Bridge 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 Chongqing Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Road Bridge has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Chongqing Road go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Chongqing Road

Assuming the 90 days trading horizon Jinhe Biotechnology is expected to generate 6.68 times less return on investment than Chongqing Road. But when comparing it to its historical volatility, Jinhe Biotechnology Co is 1.95 times less risky than Chongqing Road. It trades about 0.0 of its potential returns per unit of risk. Chongqing Road Bridge is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  559.00  in Chongqing Road Bridge on October 5, 2024 and sell it today you would lose (9.00) from holding Chongqing Road Bridge or give up 1.61% of portfolio value over 90 days.

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

Jinhe Biotechnology Co  vs.  Chongqing Road Bridge

Jinhe Biotechnology

Risk-Adjusted Performance

0 of 100

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.

Chongqing Road Bridge

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Road Bridge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Road 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 Chongqing Road

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

The idea behind Jinhe Biotechnology Co and Chongqing Road Bridge 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..