Correlation Between Xiamen Jihong and Guangzhou Jointas

Can any of the company-specific risk be diversified away by investing in both Xiamen Jihong and Guangzhou Jointas 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 Xiamen Jihong and Guangzhou Jointas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiamen Jihong Package and Guangzhou Jointas Chemical, you can compare the effects of market volatilities on Xiamen Jihong and Guangzhou Jointas 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 Xiamen Jihong with a short position of Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Jihong and Guangzhou Jointas.

Diversification Opportunities for Xiamen Jihong and Guangzhou Jointas

0.43

Correlation Coefficient

Xiamen Jihong  Guangzhou Jointas

Very weak diversification

The 3 months correlation between Xiamen and Guangzhou is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Jihong Package and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas and Xiamen Jihong 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 Xiamen Jihong Package are associated (or correlated) with Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of Xiamen Jihong i.e., Xiamen Jihong and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between Xiamen Jihong and Guangzhou Jointas

Assuming the 90 days trading horizon Xiamen Jihong Package is expected to under-perform the Guangzhou Jointas. In addition to that, Xiamen Jihong is 1.23 times more volatile than Guangzhou Jointas Chemical. It trades about -0.04 of its total potential returns per unit of risk. Guangzhou Jointas Chemical is currently generating about 0.14 per unit of volatility. If you would invest  515.00  in Guangzhou Jointas Chemical on December 27, 2024 and sell it today you would earn a total of  81.00  from holding Guangzhou Jointas Chemical or generate 15.73% return on investment over 90 days.

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

Xiamen Jihong Package  vs.  Guangzhou Jointas Chemical

Xiamen Jihong Package

Risk-Adjusted Performance

Very Weak

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

Guangzhou Jointas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Jihong and Guangzhou Jointas

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

The idea behind Xiamen Jihong Package and Guangzhou Jointas Chemical 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.