Correlation Between Jiangxi Naipu and GuoChuang Software

Can any of the company-specific risk be diversified away by investing in both Jiangxi Naipu and GuoChuang Software 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 GuoChuang Software 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 GuoChuang Software Co, you can compare the effects of market volatilities on Jiangxi Naipu and GuoChuang Software 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 GuoChuang Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi Naipu and GuoChuang Software.

Diversification Opportunities for Jiangxi Naipu and GuoChuang Software

0.87

Correlation Coefficient

Jiangxi Naipu  GuoChuang Software

Very poor diversification

The 3 months correlation between Jiangxi and GuoChuang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Naipu Mining and GuoChuang Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuoChuang Software 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 GuoChuang Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuoChuang Software has no effect on the direction of Jiangxi Naipu i.e., Jiangxi Naipu and GuoChuang Software go up and down completely randomly.

Pair Corralation between Jiangxi Naipu and GuoChuang Software

Assuming the 90 days trading horizon Jiangxi Naipu is expected to generate 3.13 times less return on investment than GuoChuang Software. But when comparing it to its historical volatility, Jiangxi Naipu Mining is 2.22 times less risky than GuoChuang Software. It trades about 0.1 of its potential returns per unit of risk. GuoChuang Software Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,482  in GuoChuang Software Co on September 5, 2024 and sell it today you would earn a total of  358.00  from holding GuoChuang Software Co or generate 14.42% return on investment over 90 days.

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

Jiangxi Naipu Mining  vs.  GuoChuang Software Co

Jiangxi Naipu Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Naipu Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Naipu sustained solid returns over the last few months and may actually be approaching a breakup point.

GuoChuang Software

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GuoChuang Software Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GuoChuang Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangxi Naipu and GuoChuang Software

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

The idea behind Jiangxi Naipu Mining and GuoChuang Software Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.