Correlation Between Guangzhou Jointas and Xiamen Jihong

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

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

Diversification Opportunities for Guangzhou Jointas and Xiamen Jihong

0.43

Correlation Coefficient

Guangzhou Jointas  Xiamen Jihong

Very weak diversification

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

Pair Corralation between Guangzhou Jointas and Xiamen Jihong

Assuming the 90 days trading horizon Guangzhou Jointas Chemical is expected to generate 0.81 times more return on investment than Xiamen Jihong. However, Guangzhou Jointas Chemical is 1.23 times less risky than Xiamen Jihong. It trades about 0.14 of its potential returns per unit of risk. Xiamen Jihong Package is currently generating about -0.04 per unit of risk. 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

Guangzhou Jointas Chemical  vs.  Xiamen Jihong Package

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.

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.

Pair Trading with Guangzhou Jointas and Xiamen Jihong

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

The idea behind Guangzhou Jointas Chemical and Xiamen Jihong Package 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.