Correlation Between Jilin Jlu and Zhangjiagang Elegant

Can any of the company-specific risk be diversified away by investing in both Jilin Jlu and Zhangjiagang Elegant 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 Jilin Jlu and Zhangjiagang Elegant into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jilin Jlu Communication and Zhangjiagang Elegant Home, you can compare the effects of market volatilities on Jilin Jlu and Zhangjiagang Elegant 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 Jilin Jlu with a short position of Zhangjiagang Elegant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin Jlu and Zhangjiagang Elegant.

Diversification Opportunities for Jilin Jlu and Zhangjiagang Elegant

0.72

Correlation Coefficient

Jilin Jlu  Zhangjiagang Elegant

Poor diversification

The 3 months correlation between Jilin and Zhangjiagang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Jlu Communication and Zhangjiagang Elegant Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Elegant Home and Jilin Jlu 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 Jilin Jlu Communication are associated (or correlated) with Zhangjiagang Elegant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Elegant Home has no effect on the direction of Jilin Jlu i.e., Jilin Jlu and Zhangjiagang Elegant go up and down completely randomly.

Pair Corralation between Jilin Jlu and Zhangjiagang Elegant

Assuming the 90 days trading horizon Jilin Jlu Communication is expected to under-perform the Zhangjiagang Elegant. In addition to that, Jilin Jlu is 1.25 times more volatile than Zhangjiagang Elegant Home. It trades about -0.08 of its total potential returns per unit of risk. Zhangjiagang Elegant Home is currently generating about -0.09 per unit of volatility. If you would invest  1,041  in Zhangjiagang Elegant Home on October 7, 2024 and sell it today you would lose (180.00) from holding Zhangjiagang Elegant Home or give up 17.29% of portfolio value over 90 days.

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

Jilin Jlu Communication  vs.  Zhangjiagang Elegant Home

Jilin Jlu Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jilin Jlu Communication 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhangjiagang Elegant Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhangjiagang Elegant Home 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jilin Jlu and Zhangjiagang Elegant

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

The idea behind Jilin Jlu Communication and Zhangjiagang Elegant Home 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.