Correlation Between Vats Liquor and Changsha Jingjia

Can any of the company-specific risk be diversified away by investing in both Vats Liquor and Changsha Jingjia 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 Vats Liquor and Changsha Jingjia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vats Liquor Chain and Changsha Jingjia Microelectronics, you can compare the effects of market volatilities on Vats Liquor and Changsha Jingjia 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 Vats Liquor with a short position of Changsha Jingjia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Changsha Jingjia.

Diversification Opportunities for Vats Liquor and Changsha Jingjia

0.57

Correlation Coefficient

Vats Liquor  Changsha Jingjia

Very weak diversification

The 3 months correlation between Vats and Changsha is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Changsha Jingjia Microelectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changsha Jingjia Mic and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Changsha Jingjia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changsha Jingjia Mic has no effect on the direction of Vats Liquor i.e., Vats Liquor and Changsha Jingjia go up and down completely randomly.

Pair Corralation between Vats Liquor and Changsha Jingjia

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Changsha Jingjia. But the stock apears to be less risky and, when comparing its historical volatility, Vats Liquor Chain is 1.02 times less risky than Changsha Jingjia. The stock trades about -0.04 of its potential returns per unit of risk. The Changsha Jingjia Microelectronics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,172  in Changsha Jingjia Microelectronics on October 5, 2024 and sell it today you would lose (539.00) from holding Changsha Jingjia Microelectronics or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Vats Liquor Chain  vs.  Changsha Jingjia Microelectron

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Changsha Jingjia Mic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vats Liquor and Changsha Jingjia

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

The idea behind Vats Liquor Chain and Changsha Jingjia Microelectronics 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.