Correlation Between Jinhe Biotechnology and Zhangjiagang Elegant

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

Diversification Opportunities for Jinhe Biotechnology and Zhangjiagang Elegant

0.8

Correlation Coefficient

Jinhe Biotechnology  Zhangjiagang Elegant

Very poor diversification

The 3 months correlation between Jinhe and Zhangjiagang is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Zhangjiagang Elegant Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Elegant Home 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 Zhangjiagang Elegant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Elegant Home has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Zhangjiagang Elegant go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Zhangjiagang Elegant

Assuming the 90 days trading horizon Jinhe Biotechnology Co is expected to generate 1.17 times more return on investment than Zhangjiagang Elegant. However, Jinhe Biotechnology is 1.17 times more volatile than Zhangjiagang Elegant Home. It trades about 0.03 of its potential returns per unit of risk. Zhangjiagang Elegant Home is currently generating about 0.03 per unit of risk. If you would invest  465.00  in Jinhe Biotechnology Co on December 27, 2024 and sell it today you would earn a total of  12.00  from holding Jinhe Biotechnology Co or generate 2.58% return on investment over 90 days.

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

Jinhe Biotechnology Co  vs.  Zhangjiagang Elegant Home

Jinhe Biotechnology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhe Biotechnology Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Zhangjiagang Elegant Home

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Elegant Home are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhangjiagang Elegant 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 Zhangjiagang Elegant

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

The idea behind Jinhe Biotechnology Co and Zhangjiagang Elegant Home 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.