Correlation Between Jinlong Machinery and Jiujiang Shanshui

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

Diversification Opportunities for Jinlong Machinery and Jiujiang Shanshui

0.61

Correlation Coefficient

Jinlong Machinery  Jiujiang Shanshui

Poor diversification

The 3 months correlation between Jinlong and Jiujiang is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and Jiujiang Shanshui Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiujiang Shanshui 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 Jiujiang Shanshui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiujiang Shanshui has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and Jiujiang Shanshui go up and down completely randomly.

Pair Corralation between Jinlong Machinery and Jiujiang Shanshui

Assuming the 90 days trading horizon Jinlong Machinery Electronic is expected to under-perform the Jiujiang Shanshui. In addition to that, Jinlong Machinery is 1.83 times more volatile than Jiujiang Shanshui Technology. It trades about -0.21 of its total potential returns per unit of risk. Jiujiang Shanshui Technology is currently generating about -0.1 per unit of volatility. If you would invest  1,637  in Jiujiang Shanshui Technology on October 11, 2024 and sell it today you would lose (154.00) from holding Jiujiang Shanshui Technology or give up 9.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Jinlong Machinery Electronic  vs.  Jiujiang Shanshui Technology

Jinlong Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jinlong Machinery Electronic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinlong Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiujiang Shanshui

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiujiang Shanshui Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiujiang Shanshui 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 Jiujiang Shanshui

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

The idea behind Jinlong Machinery Electronic and Jiujiang Shanshui Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.