Correlation Between Jinlong Machinery and PKU HealthCare

Can any of the company-specific risk be diversified away by investing in both Jinlong Machinery and PKU HealthCare 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 Jinlong Machinery and PKU HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinlong Machinery Electronic and PKU HealthCare Corp, you can compare the effects of market volatilities on Jinlong Machinery and PKU HealthCare 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 Jinlong Machinery with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinlong Machinery and PKU HealthCare.

Diversification Opportunities for Jinlong Machinery and PKU HealthCare

0.42

Correlation Coefficient

Jinlong Machinery  PKU HealthCare

Very weak diversification

The 3 months correlation between Jinlong and PKU is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Jinlong Machinery 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 Jinlong Machinery Electronic are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and PKU HealthCare go up and down completely randomly.

Pair Corralation between Jinlong Machinery and PKU HealthCare

Assuming the 90 days trading horizon Jinlong Machinery Electronic is expected to generate 0.76 times more return on investment than PKU HealthCare. However, Jinlong Machinery Electronic is 1.32 times less risky than PKU HealthCare. It trades about -0.09 of its potential returns per unit of risk. PKU HealthCare Corp is currently generating about -0.19 per unit of risk. If you would invest  470.00  in Jinlong Machinery Electronic on October 27, 2024 and sell it today you would lose (31.00) from holding Jinlong Machinery Electronic or give up 6.6% of portfolio value over 90 days.

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

Jinlong Machinery Electronic  vs.  PKU HealthCare Corp

Jinlong Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinlong Machinery Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PKU HealthCare Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PKU HealthCare Corp 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 Jinlong Machinery and PKU HealthCare

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

The idea behind Jinlong Machinery Electronic and PKU HealthCare 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..