Correlation Between Sichuan Jinshi and North Huajin

Can any of the company-specific risk be diversified away by investing in both Sichuan Jinshi and North Huajin 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 Sichuan Jinshi and North Huajin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Jinshi Technology and North Huajin Chemical, you can compare the effects of market volatilities on Sichuan Jinshi and North Huajin 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 Sichuan Jinshi with a short position of North Huajin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Jinshi and North Huajin.

Diversification Opportunities for Sichuan Jinshi and North Huajin

0.74

Correlation Coefficient

Sichuan Jinshi  North Huajin

Poor diversification

The 3 months correlation between Sichuan and North is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and North Huajin Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Huajin Chemical and Sichuan Jinshi 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 Sichuan Jinshi Technology are associated (or correlated) with North Huajin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Huajin Chemical has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and North Huajin go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and North Huajin

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to generate 1.29 times more return on investment than North Huajin. However, Sichuan Jinshi is 1.29 times more volatile than North Huajin Chemical. It trades about -0.09 of its potential returns per unit of risk. North Huajin Chemical is currently generating about -0.41 per unit of risk. If you would invest  723.00  in Sichuan Jinshi Technology on October 9, 2024 and sell it today you would lose (34.00) from holding Sichuan Jinshi Technology or give up 4.7% of portfolio value over 90 days.

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

Sichuan Jinshi Technology  vs.  North Huajin Chemical

Sichuan Jinshi Technology

Risk-Adjusted Performance

11 of 100

Good

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

North Huajin Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sichuan Jinshi and North Huajin

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

The idea behind Sichuan Jinshi Technology and North Huajin 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.