Correlation Between Chengdu Kanghua and Jinyu Bio

Can any of the company-specific risk be diversified away by investing in both Chengdu Kanghua and Jinyu Bio 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 Chengdu Kanghua and Jinyu Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu Kanghua Biological and Jinyu Bio Technology Co, you can compare the effects of market volatilities on Chengdu Kanghua and Jinyu Bio 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 Chengdu Kanghua with a short position of Jinyu Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Kanghua and Jinyu Bio.

Diversification Opportunities for Chengdu Kanghua and Jinyu Bio

0.89

Correlation Coefficient

Chengdu Kanghua  Jinyu Bio

Very poor diversification

The 3 months correlation between Chengdu and Jinyu is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and Jinyu Bio Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinyu Bio Technology and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with Jinyu Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinyu Bio Technology has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and Jinyu Bio go up and down completely randomly.

Pair Corralation between Chengdu Kanghua and Jinyu Bio

Assuming the 90 days trading horizon Chengdu Kanghua Biological is expected to generate 1.85 times more return on investment than Jinyu Bio. However, Chengdu Kanghua is 1.85 times more volatile than Jinyu Bio Technology Co. It trades about 0.06 of its potential returns per unit of risk. Jinyu Bio Technology Co is currently generating about 0.1 per unit of risk. If you would invest  5,122  in Chengdu Kanghua Biological on September 3, 2024 and sell it today you would earn a total of  641.00  from holding Chengdu Kanghua Biological or generate 12.51% return on investment over 90 days.

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

Chengdu Kanghua Biological  vs.  Jinyu Bio Technology Co

Chengdu Kanghua Biol

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Kanghua Biological are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Kanghua sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinyu Bio Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jinyu Bio Technology Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinyu Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengdu Kanghua and Jinyu Bio

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

The idea behind Chengdu Kanghua Biological and Jinyu Bio Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.