Correlation Between Jinsanjiang Silicon and Sichuan Teway

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

Diversification Opportunities for Jinsanjiang Silicon and Sichuan Teway

0.71

Correlation Coefficient

Jinsanjiang Silicon  Sichuan Teway

Poor diversification

The 3 months correlation between Jinsanjiang and Sichuan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food 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 Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of Jinsanjiang Silicon i.e., Jinsanjiang Silicon and Sichuan Teway go up and down completely randomly.

Pair Corralation between Jinsanjiang Silicon and Sichuan Teway

Assuming the 90 days trading horizon Jinsanjiang Silicon Material is expected to generate 1.52 times more return on investment than Sichuan Teway. However, Jinsanjiang Silicon is 1.52 times more volatile than Sichuan Teway Food. It trades about 0.14 of its potential returns per unit of risk. Sichuan Teway Food is currently generating about -0.05 per unit of risk. If you would invest  1,163  in Jinsanjiang Silicon Material on October 4, 2024 and sell it today you would earn a total of  119.00  from holding Jinsanjiang Silicon Material or generate 10.23% 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.  Sichuan Teway Food

Jinsanjiang Silicon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 6 (%) 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.

Sichuan Teway Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Teway Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Teway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jinsanjiang Silicon and Sichuan Teway

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

The idea behind Jinsanjiang Silicon Material and Sichuan Teway Food 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.