Correlation Between Jiujiang Shanshui and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Jiujiang Shanshui and Xiandai Investment 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 Jiujiang Shanshui and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Jiujiang Shanshui and Xiandai Investment

-0.16

Correlation Coefficient

Jiujiang Shanshui  Xiandai Investment

Good diversification

The 3 months correlation between Jiujiang and Xiandai is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Jiujiang Shanshui Technology and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and Jiujiang Shanshui 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 Jiujiang Shanshui Technology are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Jiujiang Shanshui i.e., Jiujiang Shanshui and Xiandai Investment go up and down completely randomly.

Pair Corralation between Jiujiang Shanshui and Xiandai Investment

Assuming the 90 days trading horizon Jiujiang Shanshui Technology is expected to generate 2.23 times more return on investment than Xiandai Investment. However, Jiujiang Shanshui is 2.23 times more volatile than Xiandai Investment Co. It trades about 0.16 of its potential returns per unit of risk. Xiandai Investment Co is currently generating about -0.08 per unit of risk. If you would invest  1,567  in Jiujiang Shanshui Technology on December 25, 2024 and sell it today you would earn a total of  356.00  from holding Jiujiang Shanshui Technology or generate 22.72% return on investment over 90 days.

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

Jiujiang Shanshui Technology  vs.  Xiandai Investment Co

Jiujiang Shanshui

Risk-Adjusted Performance

Good

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

Xiandai Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jiujiang Shanshui and Xiandai Investment

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

The idea behind Jiujiang Shanshui Technology and Xiandai Investment 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.