Correlation Between Jilin Jlu and Shenzhen Transsion

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

Diversification Opportunities for Jilin Jlu and Shenzhen Transsion

0.2

Correlation Coefficient

Jilin Jlu  Shenzhen Transsion

Modest diversification

The 3 months correlation between Jilin and Shenzhen is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Jlu Communication and Shenzhen Transsion Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Transsion 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 Shenzhen Transsion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Transsion has no effect on the direction of Jilin Jlu i.e., Jilin Jlu and Shenzhen Transsion go up and down completely randomly.

Pair Corralation between Jilin Jlu and Shenzhen Transsion

Assuming the 90 days trading horizon Jilin Jlu Communication is expected to under-perform the Shenzhen Transsion. In addition to that, Jilin Jlu is 1.06 times more volatile than Shenzhen Transsion Holdings. It trades about -0.03 of its total potential returns per unit of risk. Shenzhen Transsion Holdings is currently generating about 0.03 per unit of volatility. If you would invest  9,263  in Shenzhen Transsion Holdings on December 3, 2024 and sell it today you would earn a total of  202.00  from holding Shenzhen Transsion Holdings or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Jilin Jlu Communication  vs.  Shenzhen Transsion Holdings

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.

Shenzhen Transsion

Risk-Adjusted Performance

Weak

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

Pair Trading with Jilin Jlu and Shenzhen Transsion

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

The idea behind Jilin Jlu Communication and Shenzhen Transsion Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.