Correlation Between Jiangsu Jinling and Chahua Modern

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

Diversification Opportunities for Jiangsu Jinling and Chahua Modern

0.12

Correlation Coefficient

Jiangsu Jinling  Chahua Modern

Average diversification

The 3 months correlation between Jiangsu and Chahua is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jinling Sports and Chahua Modern Housewares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chahua Modern Housewares 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 Chahua Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chahua Modern Housewares has no effect on the direction of Jiangsu Jinling i.e., Jiangsu Jinling and Chahua Modern go up and down completely randomly.

Pair Corralation between Jiangsu Jinling and Chahua Modern

Assuming the 90 days trading horizon Jiangsu Jinling Sports is expected to under-perform the Chahua Modern. In addition to that, Jiangsu Jinling is 1.05 times more volatile than Chahua Modern Housewares. It trades about -0.24 of its total potential returns per unit of risk. Chahua Modern Housewares is currently generating about -0.12 per unit of volatility. If you would invest  2,275  in Chahua Modern Housewares on October 21, 2024 and sell it today you would lose (182.00) from holding Chahua Modern Housewares or give up 8.0% of portfolio value over 90 days.

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

Jiangsu Jinling Sports  vs.  Chahua Modern Housewares

Jiangsu Jinling Sports

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Jiangsu Jinling is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chahua Modern Housewares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jiangsu Jinling and Chahua Modern

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

The idea behind Jiangsu Jinling Sports and Chahua Modern Housewares 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.