Correlation Between Nanjing Putian and Jinhui Liquor

Can any of the company-specific risk be diversified away by investing in both Nanjing Putian and Jinhui Liquor 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 Jinhui Liquor 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 Jinhui Liquor Co, you can compare the effects of market volatilities on Nanjing Putian and Jinhui Liquor 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 Jinhui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Jinhui Liquor.

Diversification Opportunities for Nanjing Putian and Jinhui Liquor

0.58

Correlation Coefficient

Nanjing Putian  Jinhui Liquor

Very weak diversification

The 3 months correlation between Nanjing and Jinhui is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor 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 Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Jinhui Liquor go up and down completely randomly.

Pair Corralation between Nanjing Putian and Jinhui Liquor

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 1.57 times more return on investment than Jinhui Liquor. However, Nanjing Putian is 1.57 times more volatile than Jinhui Liquor Co. It trades about 0.02 of its potential returns per unit of risk. Jinhui Liquor Co is currently generating about -0.02 per unit of risk. If you would invest  317.00  in Nanjing Putian Telecommunications on October 10, 2024 and sell it today you would earn a total of  33.00  from holding Nanjing Putian Telecommunications or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Nanjing Putian Telecommunicati  vs.  Jinhui Liquor Co

Nanjing Putian Telec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 8 (%) 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.

Jinhui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinhui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinhui Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nanjing Putian and Jinhui Liquor

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

The idea behind Nanjing Putian Telecommunications and Jinhui Liquor Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.