Correlation Between Jahen Household and Ningbo Homelink

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

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

Diversification Opportunities for Jahen Household and Ningbo Homelink

0.91

Correlation Coefficient

Jahen Household  Ningbo Homelink

Almost no diversification

The 3 months correlation between Jahen and Ningbo is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Jahen Household Products and Ningbo Homelink Eco iTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Homelink Eco and Jahen Household 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 Jahen Household Products are associated (or correlated) with Ningbo Homelink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Homelink Eco has no effect on the direction of Jahen Household i.e., Jahen Household and Ningbo Homelink go up and down completely randomly.

Pair Corralation between Jahen Household and Ningbo Homelink

Assuming the 90 days trading horizon Jahen Household Products is expected to generate 2.1 times more return on investment than Ningbo Homelink. However, Jahen Household is 2.1 times more volatile than Ningbo Homelink Eco iTech. It trades about 0.18 of its potential returns per unit of risk. Ningbo Homelink Eco iTech is currently generating about 0.09 per unit of risk. If you would invest  1,631  in Jahen Household Products on September 14, 2024 and sell it today you would earn a total of  318.00  from holding Jahen Household Products or generate 19.5% return on investment over 90 days.

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

Jahen Household Products  vs.  Ningbo Homelink Eco iTech

Jahen Household Products

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jahen Household Products are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahen Household sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Homelink Eco

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Homelink Eco iTech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Homelink sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jahen Household and Ningbo Homelink

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

The idea behind Jahen Household Products and Ningbo Homelink Eco iTech 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 Transaction History module to view history of all your transactions and understand their impact on performance.