Correlation Between Xiamen Jiarong and Kweichow Moutai

Can any of the company-specific risk be diversified away by investing in both Xiamen Jiarong and Kweichow Moutai 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 Xiamen Jiarong and Kweichow Moutai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiamen Jiarong Technology and Kweichow Moutai Co, you can compare the effects of market volatilities on Xiamen Jiarong and Kweichow Moutai 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 Xiamen Jiarong with a short position of Kweichow Moutai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Jiarong and Kweichow Moutai.

Diversification Opportunities for Xiamen Jiarong and Kweichow Moutai

0.75

Correlation Coefficient

Xiamen Jiarong  Kweichow Moutai

Poor diversification

The 3 months correlation between Xiamen and Kweichow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Jiarong Technology and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Xiamen Jiarong 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 Xiamen Jiarong Technology are associated (or correlated) with Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Xiamen Jiarong i.e., Xiamen Jiarong and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Xiamen Jiarong and Kweichow Moutai

Assuming the 90 days trading horizon Xiamen Jiarong Technology is expected to generate 1.14 times more return on investment than Kweichow Moutai. However, Xiamen Jiarong is 1.14 times more volatile than Kweichow Moutai Co. It trades about 0.06 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about 0.05 per unit of risk. If you would invest  1,873  in Xiamen Jiarong Technology on December 26, 2024 and sell it today you would earn a total of  98.00  from holding Xiamen Jiarong Technology or generate 5.23% return on investment over 90 days.

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

Xiamen Jiarong Technology  vs.  Kweichow Moutai Co

Xiamen Jiarong Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Jiarong Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Jiarong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kweichow Moutai

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kweichow Moutai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiamen Jiarong and Kweichow Moutai

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

The idea behind Xiamen Jiarong Technology and Kweichow Moutai Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.