Correlation Between Jinlong Machinery and Qiaoyin Environmental

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

Diversification Opportunities for Jinlong Machinery and Qiaoyin Environmental

0.25

Correlation Coefficient

Jinlong Machinery  Qiaoyin Environmental

Modest diversification

The 3 months correlation between Jinlong and Qiaoyin is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental 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 Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Jinlong Machinery and Qiaoyin Environmental

Assuming the 90 days trading horizon Jinlong Machinery Electronic is expected to under-perform the Qiaoyin Environmental. In addition to that, Jinlong Machinery is 1.11 times more volatile than Qiaoyin Environmental Tech. It trades about -0.03 of its total potential returns per unit of risk. Qiaoyin Environmental Tech is currently generating about 0.13 per unit of volatility. If you would invest  1,032  in Qiaoyin Environmental Tech on December 26, 2024 and sell it today you would earn a total of  197.00  from holding Qiaoyin Environmental Tech or generate 19.09% return on investment over 90 days.

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

Jinlong Machinery Electronic  vs.  Qiaoyin Environmental Tech

Jinlong Machinery

Risk-Adjusted Performance

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 somewhat strong basic indicators, Jinlong Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qiaoyin Environmental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qiaoyin Environmental Tech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiaoyin Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinlong Machinery and Qiaoyin Environmental

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

The idea behind Jinlong Machinery Electronic and Qiaoyin Environmental Tech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.