Correlation Between Jinlong Machinery and Dongguan Tarry

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

Diversification Opportunities for Jinlong Machinery and Dongguan Tarry

0.64

Correlation Coefficient

Jinlong Machinery  Dongguan Tarry

Poor diversification

The 3 months correlation between Jinlong and Dongguan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and Dongguan Tarry Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Tarry Elect 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 Dongguan Tarry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Tarry Elect has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and Dongguan Tarry go up and down completely randomly.

Pair Corralation between Jinlong Machinery and Dongguan Tarry

Assuming the 90 days trading horizon Jinlong Machinery Electronic is expected to generate 1.07 times more return on investment than Dongguan Tarry. However, Jinlong Machinery is 1.07 times more volatile than Dongguan Tarry Electronics. It trades about -0.03 of its potential returns per unit of risk. Dongguan Tarry Electronics is currently generating about -0.04 per unit of risk. If you would invest  470.00  in Jinlong Machinery Electronic on December 26, 2024 and sell it today you would lose (30.00) from holding Jinlong Machinery Electronic or give up 6.38% of portfolio value over 90 days.

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

Jinlong Machinery Electronic  vs.  Dongguan Tarry Electronics

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.

Dongguan Tarry Elect

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongguan Tarry Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongguan Tarry 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 Dongguan Tarry

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

The idea behind Jinlong Machinery Electronic and Dongguan Tarry Electronics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.