Correlation Between Jiangxi Naipu and Shenzhen Silver

Can any of the company-specific risk be diversified away by investing in both Jiangxi Naipu and Shenzhen Silver 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 Jiangxi Naipu and Shenzhen Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangxi Naipu Mining and Shenzhen Silver Basis, you can compare the effects of market volatilities on Jiangxi Naipu and Shenzhen Silver 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 Jiangxi Naipu with a short position of Shenzhen Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi Naipu and Shenzhen Silver.

Diversification Opportunities for Jiangxi Naipu and Shenzhen Silver

0.58

Correlation Coefficient

Jiangxi Naipu  Shenzhen Silver

Very weak diversification

The 3 months correlation between Jiangxi and Shenzhen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Naipu Mining and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Jiangxi Naipu 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 Jiangxi Naipu Mining are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Jiangxi Naipu i.e., Jiangxi Naipu and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Jiangxi Naipu and Shenzhen Silver

Assuming the 90 days trading horizon Jiangxi Naipu Mining is expected to generate 0.62 times more return on investment than Shenzhen Silver. However, Jiangxi Naipu Mining is 1.62 times less risky than Shenzhen Silver. It trades about -0.01 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about -0.05 per unit of risk. If you would invest  2,787  in Jiangxi Naipu Mining on October 21, 2024 and sell it today you would lose (87.00) from holding Jiangxi Naipu Mining or give up 3.12% of portfolio value over 90 days.

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

Jiangxi Naipu Mining  vs.  Shenzhen Silver Basis

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Silver Basis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Silver Basis 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.

Pair Trading with Jiangxi Naipu and Shenzhen Silver

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

The idea behind Jiangxi Naipu Mining and Shenzhen Silver Basis 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.