Correlation Between Shandong Sino and Jinling Hotel

Can any of the company-specific risk be diversified away by investing in both Shandong Sino and Jinling Hotel 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 Shandong Sino and Jinling Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Sino Agri United and Jinling Hotel Corp, you can compare the effects of market volatilities on Shandong Sino and Jinling Hotel 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 Shandong Sino with a short position of Jinling Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sino and Jinling Hotel.

Diversification Opportunities for Shandong Sino and Jinling Hotel

0.89

Correlation Coefficient

Shandong Sino  Jinling Hotel

Very poor diversification

The 3 months correlation between Shandong and Jinling is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sino Agri United and Jinling Hotel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinling Hotel Corp and Shandong Sino 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 Shandong Sino Agri United are associated (or correlated) with Jinling Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinling Hotel Corp has no effect on the direction of Shandong Sino i.e., Shandong Sino and Jinling Hotel go up and down completely randomly.

Pair Corralation between Shandong Sino and Jinling Hotel

Assuming the 90 days trading horizon Shandong Sino Agri United is expected to generate 1.69 times more return on investment than Jinling Hotel. However, Shandong Sino is 1.69 times more volatile than Jinling Hotel Corp. It trades about 0.21 of its potential returns per unit of risk. Jinling Hotel Corp is currently generating about 0.12 per unit of risk. If you would invest  1,155  in Shandong Sino Agri United on September 5, 2024 and sell it today you would earn a total of  653.00  from holding Shandong Sino Agri United or generate 56.54% return on investment over 90 days.

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

Shandong Sino Agri United  vs.  Jinling Hotel Corp

Shandong Sino Agri

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sino Agri United are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sino sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinling Hotel Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jinling Hotel Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinling Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sino and Jinling Hotel

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

The idea behind Shandong Sino Agri United and Jinling Hotel Corp 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 Correlations module to find global opportunities by holding instruments from different markets.