Correlation Between Jiujiang Shanshui and Renxin New

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

Diversification Opportunities for Jiujiang Shanshui and Renxin New

0.57

Correlation Coefficient

Jiujiang Shanshui  Renxin New

Very weak diversification

The 3 months correlation between Jiujiang and Renxin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Jiujiang Shanshui Technology and Renxin New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renxin New Material 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 Renxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renxin New Material has no effect on the direction of Jiujiang Shanshui i.e., Jiujiang Shanshui and Renxin New go up and down completely randomly.

Pair Corralation between Jiujiang Shanshui and Renxin New

Assuming the 90 days trading horizon Jiujiang Shanshui Technology is expected to generate 1.58 times more return on investment than Renxin New. However, Jiujiang Shanshui is 1.58 times more volatile than Renxin New Material. It trades about 0.2 of its potential returns per unit of risk. Renxin New Material is currently generating about 0.09 per unit of risk. If you would invest  1,608  in Jiujiang Shanshui Technology on December 28, 2024 and sell it today you would earn a total of  702.00  from holding Jiujiang Shanshui Technology or generate 43.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Jiujiang Shanshui Technology  vs.  Renxin New Material

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 15 (%) 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.

Renxin New Material

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renxin New Material are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renxin New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiujiang Shanshui and Renxin New

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

The idea behind Jiujiang Shanshui Technology and Renxin New Material 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.