Correlation Between Jiujiang Shanshui and Qingdao Haier

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

Diversification Opportunities for Jiujiang Shanshui and Qingdao Haier

0.61

Correlation Coefficient

Jiujiang Shanshui  Qingdao Haier

Poor diversification

The 3 months correlation between Jiujiang and Qingdao is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Jiujiang Shanshui Technology and Qingdao Haier Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier Biomedical 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 Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier Biomedical has no effect on the direction of Jiujiang Shanshui i.e., Jiujiang Shanshui and Qingdao Haier go up and down completely randomly.

Pair Corralation between Jiujiang Shanshui and Qingdao Haier

Assuming the 90 days trading horizon Jiujiang Shanshui Technology is expected to generate 0.77 times more return on investment than Qingdao Haier. However, Jiujiang Shanshui Technology is 1.29 times less risky than Qingdao Haier. It trades about -0.01 of its potential returns per unit of risk. Qingdao Haier Biomedical is currently generating about -0.05 per unit of risk. If you would invest  1,892  in Jiujiang Shanshui Technology on October 11, 2024 and sell it today you would lose (398.00) from holding Jiujiang Shanshui Technology or give up 21.04% of portfolio value over 90 days.

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

Jiujiang Shanshui Technology  vs.  Qingdao Haier Biomedical

Jiujiang Shanshui

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiujiang Shanshui Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiujiang Shanshui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qingdao Haier Biomedical

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Haier Biomedical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qingdao Haier 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 Qingdao Haier

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

The idea behind Jiujiang Shanshui Technology and Qingdao Haier Biomedical 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.