Correlation Between Jinsanjiang Silicon and ChengDu Hi

Can any of the company-specific risk be diversified away by investing in both Jinsanjiang Silicon and ChengDu Hi 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 Jinsanjiang Silicon and ChengDu Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinsanjiang Silicon Material and ChengDu Hi Tech Development, you can compare the effects of market volatilities on Jinsanjiang Silicon and ChengDu Hi 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 Jinsanjiang Silicon with a short position of ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinsanjiang Silicon and ChengDu Hi.

Diversification Opportunities for Jinsanjiang Silicon and ChengDu Hi

0.4

Correlation Coefficient

Jinsanjiang Silicon  ChengDu Hi

Very weak diversification

The 3 months correlation between Jinsanjiang and ChengDu is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech and Jinsanjiang Silicon 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 Jinsanjiang Silicon Material are associated (or correlated) with ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of Jinsanjiang Silicon i.e., Jinsanjiang Silicon and ChengDu Hi go up and down completely randomly.

Pair Corralation between Jinsanjiang Silicon and ChengDu Hi

Assuming the 90 days trading horizon Jinsanjiang Silicon is expected to generate 2.75 times less return on investment than ChengDu Hi. But when comparing it to its historical volatility, Jinsanjiang Silicon Material is 1.18 times less risky than ChengDu Hi. It trades about 0.01 of its potential returns per unit of risk. ChengDu Hi Tech Development is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,710  in ChengDu Hi Tech Development on October 21, 2024 and sell it today you would lose (565.00) from holding ChengDu Hi Tech Development or give up 9.89% of portfolio value over 90 days.

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

Jinsanjiang Silicon Material  vs.  ChengDu Hi Tech Development

Jinsanjiang Silicon

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinsanjiang Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

ChengDu Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChengDu Hi Tech Development 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.

Pair Trading with Jinsanjiang Silicon and ChengDu Hi

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

The idea behind Jinsanjiang Silicon Material and ChengDu Hi Tech Development 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.