Correlation Between Aba Chemicals and Jinsanjiang (Zhaoqing)

Can any of the company-specific risk be diversified away by investing in both Aba Chemicals and Jinsanjiang (Zhaoqing) 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 Aba Chemicals and Jinsanjiang (Zhaoqing) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aba Chemicals Corp and Jinsanjiang Silicon Material, you can compare the effects of market volatilities on Aba Chemicals and Jinsanjiang (Zhaoqing) 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 Aba Chemicals with a short position of Jinsanjiang (Zhaoqing). Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and Jinsanjiang (Zhaoqing).

Diversification Opportunities for Aba Chemicals and Jinsanjiang (Zhaoqing)

0.62

Correlation Coefficient

Aba Chemicals  Jinsanjiang (Zhaoqing)

Poor diversification

The 3 months correlation between Aba and Jinsanjiang is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang (Zhaoqing) and Aba Chemicals 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 Aba Chemicals Corp are associated (or correlated) with Jinsanjiang (Zhaoqing). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang (Zhaoqing) has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Jinsanjiang (Zhaoqing) go up and down completely randomly.

Pair Corralation between Aba Chemicals and Jinsanjiang (Zhaoqing)

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to generate 0.81 times more return on investment than Jinsanjiang (Zhaoqing). However, Aba Chemicals Corp is 1.23 times less risky than Jinsanjiang (Zhaoqing). It trades about 0.03 of its potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about 0.0 per unit of risk. If you would invest  714.00  in Aba Chemicals Corp on December 26, 2024 and sell it today you would earn a total of  24.00  from holding Aba Chemicals Corp or generate 3.36% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  Jinsanjiang Silicon Material

Aba Chemicals Corp

Risk-Adjusted Performance

Insignificant

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

Jinsanjiang (Zhaoqing)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinsanjiang Silicon Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinsanjiang (Zhaoqing) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aba Chemicals and Jinsanjiang (Zhaoqing)

The main advantage of trading using opposite Aba Chemicals and Jinsanjiang (Zhaoqing) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aba Chemicals position performs unexpectedly, Jinsanjiang (Zhaoqing) 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 Jinsanjiang (Zhaoqing) will offset losses from the drop in Jinsanjiang (Zhaoqing)'s long position.

The idea behind Aba Chemicals Corp and Jinsanjiang Silicon Material 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.