Correlation Between Jiangsu Jinling and Shanghai Putailai

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

Diversification Opportunities for Jiangsu Jinling and Shanghai Putailai

0.56

Correlation Coefficient

Jiangsu Jinling  Shanghai Putailai

Very weak diversification

The 3 months correlation between Jiangsu and Shanghai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jinling Sports and Shanghai Putailai New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Putailai New 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 Shanghai Putailai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Putailai New has no effect on the direction of Jiangsu Jinling i.e., Jiangsu Jinling and Shanghai Putailai go up and down completely randomly.

Pair Corralation between Jiangsu Jinling and Shanghai Putailai

Assuming the 90 days trading horizon Jiangsu Jinling Sports is expected to under-perform the Shanghai Putailai. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Jinling Sports is 1.11 times less risky than Shanghai Putailai. The stock trades about -0.08 of its potential returns per unit of risk. The Shanghai Putailai New is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,643  in Shanghai Putailai New on October 7, 2024 and sell it today you would lose (166.00) from holding Shanghai Putailai New or give up 10.1% of portfolio value over 90 days.

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

Jiangsu Jinling Sports  vs.  Shanghai Putailai New

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shanghai Putailai New

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Jiangsu Jinling Sports and Shanghai Putailai New 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..