Correlation Between Jilin Jlu and Linewell Software

Can any of the company-specific risk be diversified away by investing in both Jilin Jlu and Linewell Software 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 Linewell Software 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 Linewell Software Co, you can compare the effects of market volatilities on Jilin Jlu and Linewell Software 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 Linewell Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin Jlu and Linewell Software.

Diversification Opportunities for Jilin Jlu and Linewell Software

0.51

Correlation Coefficient

Jilin Jlu  Linewell Software

Very weak diversification

The 3 months correlation between Jilin and Linewell is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Jlu Communication and Linewell Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linewell Software 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 Linewell Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linewell Software has no effect on the direction of Jilin Jlu i.e., Jilin Jlu and Linewell Software go up and down completely randomly.

Pair Corralation between Jilin Jlu and Linewell Software

Assuming the 90 days trading horizon Jilin Jlu is expected to generate 2.72 times less return on investment than Linewell Software. But when comparing it to its historical volatility, Jilin Jlu Communication is 2.49 times less risky than Linewell Software. It trades about 0.05 of its potential returns per unit of risk. Linewell Software Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,469  in Linewell Software Co on December 10, 2024 and sell it today you would earn a total of  53.00  from holding Linewell Software Co or generate 3.61% return on investment over 90 days.

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

Jilin Jlu Communication  vs.  Linewell Software Co

Jilin Jlu Communication

Risk-Adjusted Performance

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 somewhat strong basic indicators, Jilin Jlu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Linewell Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jilin Jlu and Linewell Software

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

The idea behind Jilin Jlu Communication and Linewell Software 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.

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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.