Correlation Between Jiujiang Shanshui and Changsha Jingjia

Can any of the company-specific risk be diversified away by investing in both Jiujiang Shanshui and Changsha Jingjia 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 Changsha Jingjia 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 Changsha Jingjia Microelectronics, you can compare the effects of market volatilities on Jiujiang Shanshui and Changsha Jingjia 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 Changsha Jingjia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiujiang Shanshui and Changsha Jingjia.

Diversification Opportunities for Jiujiang Shanshui and Changsha Jingjia

-0.22

Correlation Coefficient

Jiujiang Shanshui  Changsha Jingjia

Very good diversification

The 3 months correlation between Jiujiang and Changsha is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Jiujiang Shanshui Technology and Changsha Jingjia Microelectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changsha Jingjia Mic 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 Changsha Jingjia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changsha Jingjia Mic has no effect on the direction of Jiujiang Shanshui i.e., Jiujiang Shanshui and Changsha Jingjia go up and down completely randomly.

Pair Corralation between Jiujiang Shanshui and Changsha Jingjia

Assuming the 90 days trading horizon Jiujiang Shanshui Technology is expected to generate 0.75 times more return on investment than Changsha Jingjia. However, Jiujiang Shanshui Technology is 1.33 times less risky than Changsha Jingjia. It trades about 0.16 of its potential returns per unit of risk. Changsha Jingjia Microelectronics is currently generating about -0.13 per unit of risk. If you would invest  1,574  in Jiujiang Shanshui Technology on December 26, 2024 and sell it today you would earn a total of  349.00  from holding Jiujiang Shanshui Technology or generate 22.17% 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.  Changsha Jingjia Microelectron

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.

Changsha Jingjia Mic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changsha Jingjia Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jiujiang Shanshui and Changsha Jingjia

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

The idea behind Jiujiang Shanshui Technology and Changsha Jingjia Microelectronics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.