Correlation Between Sichuan Jinshi and ChengDu Hi

Can any of the company-specific risk be diversified away by investing in both Sichuan Jinshi and ChengDu Hi 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 ChengDu Hi 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 ChengDu Hi Tech Development, you can compare the effects of market volatilities on Sichuan Jinshi and ChengDu Hi 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 ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Jinshi and ChengDu Hi.

Diversification Opportunities for Sichuan Jinshi and ChengDu Hi

-0.49

Correlation Coefficient

Sichuan Jinshi  ChengDu Hi

Very good diversification

The 3 months correlation between Sichuan and ChengDu is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech 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 ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and ChengDu Hi go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and ChengDu Hi

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to generate 0.87 times more return on investment than ChengDu Hi. However, Sichuan Jinshi Technology is 1.15 times less risky than ChengDu Hi. It trades about 0.05 of its potential returns per unit of risk. ChengDu Hi Tech Development is currently generating about -0.15 per unit of risk. If you would invest  668.00  in Sichuan Jinshi Technology on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Sichuan Jinshi Technology or generate 6.29% return on investment over 90 days.

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

Sichuan Jinshi Technology  vs.  ChengDu Hi Tech Development

Sichuan Jinshi Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ChengDu Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChengDu Hi Tech Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sichuan Jinshi and ChengDu Hi

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

The idea behind Sichuan Jinshi Technology and ChengDu Hi Tech Development 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.