Correlation Between Jiangsu Jinling and Qingdao Choho

Can any of the company-specific risk be diversified away by investing in both Jiangsu Jinling and Qingdao Choho 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 Jiangsu Jinling and Qingdao Choho into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Jinling Sports and Qingdao Choho Industrial, you can compare the effects of market volatilities on Jiangsu Jinling and Qingdao Choho 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 Jiangsu Jinling with a short position of Qingdao Choho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Jinling and Qingdao Choho.

Diversification Opportunities for Jiangsu Jinling and Qingdao Choho

0.92

Correlation Coefficient

Jiangsu Jinling  Qingdao Choho

Almost no diversification

The 3 months correlation between Jiangsu and Qingdao is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jinling Sports and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial and Jiangsu Jinling 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 Jiangsu Jinling Sports are associated (or correlated) with Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Jiangsu Jinling i.e., Jiangsu Jinling and Qingdao Choho go up and down completely randomly.

Pair Corralation between Jiangsu Jinling and Qingdao Choho

Assuming the 90 days trading horizon Jiangsu Jinling Sports is expected to generate 1.25 times more return on investment than Qingdao Choho. However, Jiangsu Jinling is 1.25 times more volatile than Qingdao Choho Industrial. It trades about 0.16 of its potential returns per unit of risk. Qingdao Choho Industrial is currently generating about 0.15 per unit of risk. If you would invest  1,125  in Jiangsu Jinling Sports on September 2, 2024 and sell it today you would earn a total of  384.00  from holding Jiangsu Jinling Sports or generate 34.13% return on investment over 90 days.

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

Jiangsu Jinling Sports  vs.  Qingdao Choho Industrial

Jiangsu Jinling Sports

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Jinling Sports are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Jinling sustained solid returns over the last few months and may actually be approaching a breakup point.

Qingdao Choho Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Jinling and Qingdao Choho

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

The idea behind Jiangsu Jinling Sports and Qingdao Choho Industrial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.