Correlation Between Sichuan Jinshi and Jiangxi Hengda

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

Diversification Opportunities for Sichuan Jinshi and Jiangxi Hengda

0.6

Correlation Coefficient

Sichuan Jinshi  Jiangxi Hengda

Poor diversification

The 3 months correlation between Sichuan and Jiangxi is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Jiangxi Hengda Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Hengda Hi 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 Jiangxi Hengda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Hengda Hi has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and Jiangxi Hengda go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Jiangxi Hengda

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to under-perform the Jiangxi Hengda. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Jinshi Technology is 1.3 times less risky than Jiangxi Hengda. The stock trades about -0.1 of its potential returns per unit of risk. The Jiangxi Hengda Hi Tech is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  593.00  in Jiangxi Hengda Hi Tech on December 1, 2024 and sell it today you would lose (69.00) from holding Jiangxi Hengda Hi Tech or give up 11.64% 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.  Jiangxi Hengda Hi Tech

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.

Jiangxi Hengda Hi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangxi Hengda Hi Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sichuan Jinshi and Jiangxi Hengda

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

The idea behind Sichuan Jinshi Technology and Jiangxi Hengda Hi Tech 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.