Correlation Between Guangdong Jinma and Jahen Household

Can any of the company-specific risk be diversified away by investing in both Guangdong Jinma and Jahen Household 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 Guangdong Jinma and Jahen Household into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Jinma Entertainment and Jahen Household Products, you can compare the effects of market volatilities on Guangdong Jinma and Jahen Household 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 Guangdong Jinma with a short position of Jahen Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jinma and Jahen Household.

Diversification Opportunities for Guangdong Jinma and Jahen Household

0.77

Correlation Coefficient

Guangdong Jinma  Jahen Household

Poor diversification

The 3 months correlation between Guangdong and Jahen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinma Entertainment and Jahen Household Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahen Household Products and Guangdong Jinma 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 Guangdong Jinma Entertainment are associated (or correlated) with Jahen Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahen Household Products has no effect on the direction of Guangdong Jinma i.e., Guangdong Jinma and Jahen Household go up and down completely randomly.

Pair Corralation between Guangdong Jinma and Jahen Household

Assuming the 90 days trading horizon Guangdong Jinma Entertainment is expected to under-perform the Jahen Household. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Jinma Entertainment is 2.17 times less risky than Jahen Household. The stock trades about -0.21 of its potential returns per unit of risk. The Jahen Household Products is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Jahen Household Products on October 10, 2024 and sell it today you would lose (172.00) from holding Jahen Household Products or give up 10.62% of portfolio value over 90 days.

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

Guangdong Jinma Entertainment  vs.  Jahen Household Products

Guangdong Jinma Ente

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinma Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinma may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jahen Household Products

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jahen Household Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahen Household may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangdong Jinma and Jahen Household

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

The idea behind Guangdong Jinma Entertainment and Jahen Household Products 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.