Correlation Between Dirui Industrial and Jafron Biomedical

Can any of the company-specific risk be diversified away by investing in both Dirui Industrial and Jafron Biomedical 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 Dirui Industrial and Jafron Biomedical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dirui Industrial Co and Jafron Biomedical Co, you can compare the effects of market volatilities on Dirui Industrial and Jafron Biomedical 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 Dirui Industrial with a short position of Jafron Biomedical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dirui Industrial and Jafron Biomedical.

Diversification Opportunities for Dirui Industrial and Jafron Biomedical

0.43

Correlation Coefficient

Dirui Industrial  Jafron Biomedical

Very weak diversification

The 3 months correlation between Dirui and Jafron is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dirui Industrial Co and Jafron Biomedical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jafron Biomedical and Dirui Industrial 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 Dirui Industrial Co are associated (or correlated) with Jafron Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jafron Biomedical has no effect on the direction of Dirui Industrial i.e., Dirui Industrial and Jafron Biomedical go up and down completely randomly.

Pair Corralation between Dirui Industrial and Jafron Biomedical

Assuming the 90 days trading horizon Dirui Industrial Co is expected to generate 1.41 times more return on investment than Jafron Biomedical. However, Dirui Industrial is 1.41 times more volatile than Jafron Biomedical Co. It trades about -0.05 of its potential returns per unit of risk. Jafron Biomedical Co is currently generating about -0.16 per unit of risk. If you would invest  1,684  in Dirui Industrial Co on December 2, 2024 and sell it today you would lose (140.00) from holding Dirui Industrial Co or give up 8.31% of portfolio value over 90 days.

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

Dirui Industrial Co  vs.  Jafron Biomedical Co

Dirui Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dirui Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jafron Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jafron Biomedical Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dirui Industrial and Jafron Biomedical

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

The idea behind Dirui Industrial Co and Jafron Biomedical 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.