Correlation Between Jiangsu Jinling and Renxin New

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

Diversification Opportunities for Jiangsu Jinling and Renxin New

0.82

Correlation Coefficient

Jiangsu Jinling  Renxin New

Very poor diversification

The 3 months correlation between Jiangsu and Renxin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jinling Sports and Renxin New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renxin New Material 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 Renxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renxin New Material has no effect on the direction of Jiangsu Jinling i.e., Jiangsu Jinling and Renxin New go up and down completely randomly.

Pair Corralation between Jiangsu Jinling and Renxin New

Assuming the 90 days trading horizon Jiangsu Jinling Sports is expected to under-perform the Renxin New. In addition to that, Jiangsu Jinling is 1.96 times more volatile than Renxin New Material. It trades about -0.06 of its total potential returns per unit of risk. Renxin New Material is currently generating about -0.05 per unit of volatility. If you would invest  1,239  in Renxin New Material on December 2, 2024 and sell it today you would lose (73.00) from holding Renxin New Material or give up 5.89% of portfolio value over 90 days.

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

Jiangsu Jinling Sports  vs.  Renxin New Material

Jiangsu Jinling Sports

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Jinling Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Renxin New Material

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renxin New Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Renxin New 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 Renxin New

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

The idea behind Jiangsu Jinling Sports and Renxin New Material 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.