Correlation Between Jinlong Machinery and Shenzhen MTC

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

Diversification Opportunities for Jinlong Machinery and Shenzhen MTC

-0.2

Correlation Coefficient

Jinlong Machinery  Shenzhen MTC

Good diversification

The 3 months correlation between Jinlong and Shenzhen is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and Shenzhen MTC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MTC 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 Shenzhen MTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MTC has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and Shenzhen MTC go up and down completely randomly.

Pair Corralation between Jinlong Machinery and Shenzhen MTC

Assuming the 90 days trading horizon Jinlong Machinery Electronic is expected to under-perform the Shenzhen MTC. But the stock apears to be less risky and, when comparing its historical volatility, Jinlong Machinery Electronic is 1.12 times less risky than Shenzhen MTC. The stock trades about -0.16 of its potential returns per unit of risk. The Shenzhen MTC Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Shenzhen MTC Co on October 25, 2024 and sell it today you would lose (47.00) from holding Shenzhen MTC Co or give up 7.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Jinlong Machinery Electronic  vs.  Shenzhen MTC Co

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.

Shenzhen MTC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MTC Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen MTC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jinlong Machinery and Shenzhen MTC

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

The idea behind Jinlong Machinery Electronic and Shenzhen MTC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.