Correlation Between Jinro Distillers and Hannong Chemicals

Can any of the company-specific risk be diversified away by investing in both Jinro Distillers and Hannong Chemicals 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 Jinro Distillers and Hannong Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinro Distillers Co and Hannong Chemicals, you can compare the effects of market volatilities on Jinro Distillers and Hannong Chemicals 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 Jinro Distillers with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinro Distillers and Hannong Chemicals.

Diversification Opportunities for Jinro Distillers and Hannong Chemicals

0.38

Correlation Coefficient

Jinro Distillers  Hannong Chemicals

Weak diversification

The 3 months correlation between Jinro and Hannong is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Jinro Distillers Co and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and Jinro Distillers 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 Jinro Distillers Co are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of Jinro Distillers i.e., Jinro Distillers and Hannong Chemicals go up and down completely randomly.

Pair Corralation between Jinro Distillers and Hannong Chemicals

Assuming the 90 days trading horizon Jinro Distillers is expected to generate 12.3 times less return on investment than Hannong Chemicals. But when comparing it to its historical volatility, Jinro Distillers Co is 8.94 times less risky than Hannong Chemicals. It trades about 0.09 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,319,000  in Hannong Chemicals on December 25, 2024 and sell it today you would earn a total of  339,000  from holding Hannong Chemicals or generate 25.7% return on investment over 90 days.

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

Jinro Distillers Co  vs.  Hannong Chemicals

Jinro Distillers

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinro Distillers Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jinro Distillers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hannong Chemicals

Risk-Adjusted Performance

OK

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

Pair Trading with Jinro Distillers and Hannong Chemicals

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

The idea behind Jinro Distillers Co and Hannong Chemicals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.