Correlation Between Jiangsu Xinning and Senci Electric

Can any of the company-specific risk be diversified away by investing in both Jiangsu Xinning and Senci Electric 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 Jiangsu Xinning and Senci Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Xinning Modern and Senci Electric Machinery, you can compare the effects of market volatilities on Jiangsu Xinning and Senci Electric 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 Jiangsu Xinning with a short position of Senci Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Xinning and Senci Electric.

Diversification Opportunities for Jiangsu Xinning and Senci Electric

0.19

Correlation Coefficient

Jiangsu Xinning  Senci Electric

Average diversification

The 3 months correlation between Jiangsu and Senci is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Xinning Modern and Senci Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senci Electric Machinery and Jiangsu Xinning 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 Jiangsu Xinning Modern are associated (or correlated) with Senci Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senci Electric Machinery has no effect on the direction of Jiangsu Xinning i.e., Jiangsu Xinning and Senci Electric go up and down completely randomly.

Pair Corralation between Jiangsu Xinning and Senci Electric

Assuming the 90 days trading horizon Jiangsu Xinning Modern is expected to under-perform the Senci Electric. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Xinning Modern is 1.68 times less risky than Senci Electric. The stock trades about -0.01 of its potential returns per unit of risk. The Senci Electric Machinery is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,772  in Senci Electric Machinery on December 30, 2024 and sell it today you would earn a total of  333.00  from holding Senci Electric Machinery or generate 18.79% return on investment over 90 days.

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

Jiangsu Xinning Modern  vs.  Senci Electric Machinery

Jiangsu Xinning Modern

Risk-Adjusted Performance

Very Weak

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

Senci Electric Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senci Electric Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Senci Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Xinning and Senci Electric

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

The idea behind Jiangsu Xinning Modern and Senci Electric Machinery 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.