Correlation Between Jilin Jlu and Sinocelltech

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

Diversification Opportunities for Jilin Jlu and Sinocelltech

0.87

Correlation Coefficient

Jilin Jlu  Sinocelltech

Very poor diversification

The 3 months correlation between Jilin and Sinocelltech is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Jlu Communication and Sinocelltech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocelltech Group 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 Sinocelltech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocelltech Group has no effect on the direction of Jilin Jlu i.e., Jilin Jlu and Sinocelltech go up and down completely randomly.

Pair Corralation between Jilin Jlu and Sinocelltech

Assuming the 90 days trading horizon Jilin Jlu is expected to generate 1.51 times less return on investment than Sinocelltech. In addition to that, Jilin Jlu is 1.59 times more volatile than Sinocelltech Group. It trades about 0.02 of its total potential returns per unit of risk. Sinocelltech Group is currently generating about 0.04 per unit of volatility. If you would invest  3,838  in Sinocelltech Group on November 28, 2024 and sell it today you would earn a total of  112.00  from holding Sinocelltech Group or generate 2.92% return on investment over 90 days.

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

Jilin Jlu Communication  vs.  Sinocelltech Group

Jilin Jlu Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Jlu Communication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Sinocelltech Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocelltech Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinocelltech 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 Sinocelltech

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

The idea behind Jilin Jlu Communication and Sinocelltech Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.