Correlation Between Jinsanjiang (Zhaoqing) and HeBei Jinniu

Can any of the company-specific risk be diversified away by investing in both Jinsanjiang (Zhaoqing) and HeBei Jinniu 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 (Zhaoqing) and HeBei Jinniu 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 HeBei Jinniu Chemical, you can compare the effects of market volatilities on Jinsanjiang (Zhaoqing) and HeBei Jinniu 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 (Zhaoqing) with a short position of HeBei Jinniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinsanjiang (Zhaoqing) and HeBei Jinniu.

Diversification Opportunities for Jinsanjiang (Zhaoqing) and HeBei Jinniu

-0.58

Correlation Coefficient

Jinsanjiang (Zhaoqing)  HeBei Jinniu

Excellent diversification

The 3 months correlation between Jinsanjiang and HeBei is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical and Jinsanjiang (Zhaoqing) 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of Jinsanjiang (Zhaoqing) i.e., Jinsanjiang (Zhaoqing) and HeBei Jinniu go up and down completely randomly.

Pair Corralation between Jinsanjiang (Zhaoqing) and HeBei Jinniu

Assuming the 90 days trading horizon Jinsanjiang Silicon Material is expected to under-perform the HeBei Jinniu. In addition to that, Jinsanjiang (Zhaoqing) is 1.15 times more volatile than HeBei Jinniu Chemical. It trades about -0.02 of its total potential returns per unit of risk. HeBei Jinniu Chemical is currently generating about 0.16 per unit of volatility. If you would invest  489.00  in HeBei Jinniu Chemical on December 27, 2024 and sell it today you would earn a total of  127.00  from holding HeBei Jinniu Chemical or generate 25.97% return on investment over 90 days.

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

Jinsanjiang Silicon Material  vs.  HeBei Jinniu Chemical

Jinsanjiang (Zhaoqing)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinsanjiang Silicon Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinsanjiang (Zhaoqing) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HeBei Jinniu Chemical

Risk-Adjusted Performance

Good

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

Pair Trading with Jinsanjiang (Zhaoqing) and HeBei Jinniu

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

The idea behind Jinsanjiang Silicon Material and HeBei Jinniu Chemical 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.