Correlation Between Nanjing Putian and Guangdong Jinma

Can any of the company-specific risk be diversified away by investing in both Nanjing Putian and Guangdong Jinma 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 Nanjing Putian and Guangdong Jinma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Guangdong Jinma Entertainment, you can compare the effects of market volatilities on Nanjing Putian and Guangdong Jinma 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 Nanjing Putian with a short position of Guangdong Jinma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Guangdong Jinma.

Diversification Opportunities for Nanjing Putian and Guangdong Jinma

0.71

Correlation Coefficient

Nanjing Putian  Guangdong Jinma

Poor diversification

The 3 months correlation between Nanjing and Guangdong is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Guangdong Jinma Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinma Ente and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Guangdong Jinma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinma Ente has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Guangdong Jinma go up and down completely randomly.

Pair Corralation between Nanjing Putian and Guangdong Jinma

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 1.16 times more return on investment than Guangdong Jinma. However, Nanjing Putian is 1.16 times more volatile than Guangdong Jinma Entertainment. It trades about 0.14 of its potential returns per unit of risk. Guangdong Jinma Entertainment is currently generating about -0.04 per unit of risk. If you would invest  260.00  in Nanjing Putian Telecommunications on October 5, 2024 and sell it today you would earn a total of  103.00  from holding Nanjing Putian Telecommunications or generate 39.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Nanjing Putian Telecommunicati  vs.  Guangdong Jinma Entertainment

Nanjing Putian Telec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jinma Ente

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Jinma Entertainment 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 Nanjing Putian and Guangdong Jinma

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

The idea behind Nanjing Putian Telecommunications and Guangdong Jinma Entertainment 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .