Correlation Between Sichuan Jinshi and Fujian Newland

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

Diversification Opportunities for Sichuan Jinshi and Fujian Newland

-0.34

Correlation Coefficient

Sichuan Jinshi  Fujian Newland

Very good diversification

The 3 months correlation between Sichuan and Fujian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Fujian Newland Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Newland Computer 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 Fujian Newland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Newland Computer has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and Fujian Newland go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Fujian Newland

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to under-perform the Fujian Newland. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Jinshi Technology is 1.14 times less risky than Fujian Newland. The stock trades about -0.1 of its potential returns per unit of risk. The Fujian Newland Computer is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,137  in Fujian Newland Computer on December 1, 2024 and sell it today you would earn a total of  129.00  from holding Fujian Newland Computer or generate 6.04% return on investment over 90 days.

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

Sichuan Jinshi Technology  vs.  Fujian Newland Computer

Sichuan Jinshi Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Jinshi Technology 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.

Fujian Newland Computer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Newland Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Newland may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sichuan Jinshi and Fujian Newland

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

The idea behind Sichuan Jinshi Technology and Fujian Newland Computer 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 Transaction History module to view history of all your transactions and understand their impact on performance.