Correlation Between Yingde Greatchem and Jiangsu Cai

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Jiangsu Cai 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 Yingde Greatchem and Jiangsu Cai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Jiangsu Cai Qin, you can compare the effects of market volatilities on Yingde Greatchem and Jiangsu Cai 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 Yingde Greatchem with a short position of Jiangsu Cai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Jiangsu Cai.

Diversification Opportunities for Yingde Greatchem and Jiangsu Cai

0.55

Correlation Coefficient

Yingde Greatchem  Jiangsu Cai

Very weak diversification

The 3 months correlation between Yingde and Jiangsu is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Jiangsu Cai Qin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Cai Qin and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Jiangsu Cai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Cai Qin has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Jiangsu Cai go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Jiangsu Cai

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to under-perform the Jiangsu Cai. But the stock apears to be less risky and, when comparing its historical volatility, Yingde Greatchem Chemicals is 1.35 times less risky than Jiangsu Cai. The stock trades about -0.03 of its potential returns per unit of risk. The Jiangsu Cai Qin is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,546  in Jiangsu Cai Qin on October 8, 2024 and sell it today you would earn a total of  111.00  from holding Jiangsu Cai Qin or generate 7.18% return on investment over 90 days.

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

Yingde Greatchem Chemicals  vs.  Jiangsu Cai Qin

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yingde Greatchem Chemicals 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.

Jiangsu Cai Qin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yingde Greatchem and Jiangsu Cai

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

The idea behind Yingde Greatchem Chemicals and Jiangsu Cai Qin 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.