Correlation Between Jiangsu Jinling and Aba Chemicals

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

Diversification Opportunities for Jiangsu Jinling and Aba Chemicals

0.72

Correlation Coefficient

Jiangsu Jinling  Aba Chemicals

Poor diversification

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

Pair Corralation between Jiangsu Jinling and Aba Chemicals

Assuming the 90 days trading horizon Jiangsu Jinling Sports is expected to generate 1.0 times more return on investment than Aba Chemicals. However, Jiangsu Jinling is 1.0 times more volatile than Aba Chemicals Corp. It trades about 0.06 of its potential returns per unit of risk. Aba Chemicals Corp is currently generating about -0.02 per unit of risk. If you would invest  1,343  in Jiangsu Jinling Sports on December 24, 2024 and sell it today you would earn a total of  87.00  from holding Jiangsu Jinling Sports or generate 6.48% return on investment over 90 days.

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

Jiangsu Jinling Sports  vs.  Aba Chemicals Corp

Jiangsu Jinling Sports

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Jinling Sports are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Jinling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aba Chemicals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aba Chemicals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aba Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangsu Jinling and Aba Chemicals

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

The idea behind Jiangsu Jinling Sports and Aba Chemicals Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.