Correlation Between Jinsanjiang Silicon and Suzhou Mingzhi

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

Diversification Opportunities for Jinsanjiang Silicon and Suzhou Mingzhi

0.92

Correlation Coefficient

Jinsanjiang Silicon  Suzhou Mingzhi

Almost no diversification

The 3 months correlation between Jinsanjiang and Suzhou is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and Suzhou Mingzhi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Mingzhi Technology 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 Suzhou Mingzhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Mingzhi Technology has no effect on the direction of Jinsanjiang Silicon i.e., Jinsanjiang Silicon and Suzhou Mingzhi go up and down completely randomly.

Pair Corralation between Jinsanjiang Silicon and Suzhou Mingzhi

Assuming the 90 days trading horizon Jinsanjiang Silicon Material is expected to generate 1.21 times more return on investment than Suzhou Mingzhi. However, Jinsanjiang Silicon is 1.21 times more volatile than Suzhou Mingzhi Technology. It trades about 0.16 of its potential returns per unit of risk. Suzhou Mingzhi Technology is currently generating about 0.18 per unit of risk. If you would invest  788.00  in Jinsanjiang Silicon Material on September 13, 2024 and sell it today you would earn a total of  378.00  from holding Jinsanjiang Silicon Material or generate 47.97% return on investment over 90 days.

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

Jinsanjiang Silicon Material  vs.  Suzhou Mingzhi Technology

Jinsanjiang Silicon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 12 (%) 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.

Suzhou Mingzhi Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Mingzhi Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Mingzhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinsanjiang Silicon and Suzhou Mingzhi

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

The idea behind Jinsanjiang Silicon Material and Suzhou Mingzhi Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.