Correlation Between Jinsanjiang Silicon and Zoje Resources

Can any of the company-specific risk be diversified away by investing in both Jinsanjiang Silicon and Zoje Resources 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 Zoje Resources 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 Zoje Resources Investment, you can compare the effects of market volatilities on Jinsanjiang Silicon and Zoje Resources 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 Zoje Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinsanjiang Silicon and Zoje Resources.

Diversification Opportunities for Jinsanjiang Silicon and Zoje Resources

0.6

Correlation Coefficient

Jinsanjiang Silicon  Zoje Resources

Poor diversification

The 3 months correlation between Jinsanjiang and Zoje is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and Zoje Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoje Resources Investment 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 Zoje Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoje Resources Investment has no effect on the direction of Jinsanjiang Silicon i.e., Jinsanjiang Silicon and Zoje Resources go up and down completely randomly.

Pair Corralation between Jinsanjiang Silicon and Zoje Resources

Assuming the 90 days trading horizon Jinsanjiang Silicon is expected to generate 2.45 times less return on investment than Zoje Resources. In addition to that, Jinsanjiang Silicon is 1.09 times more volatile than Zoje Resources Investment. It trades about 0.06 of its total potential returns per unit of risk. Zoje Resources Investment is currently generating about 0.16 per unit of volatility. If you would invest  182.00  in Zoje Resources Investment on October 11, 2024 and sell it today you would earn a total of  87.00  from holding Zoje Resources Investment or generate 47.8% return on investment over 90 days.

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

Jinsanjiang Silicon Material  vs.  Zoje Resources Investment

Jinsanjiang Silicon

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 4 (%) 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.

Zoje Resources Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoje Resources Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoje Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinsanjiang Silicon and Zoje Resources

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

The idea behind Jinsanjiang Silicon Material and Zoje Resources Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.