Correlation Between AVIC Fund and Jizhong Energy

Can any of the company-specific risk be diversified away by investing in both AVIC Fund and Jizhong Energy 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 AVIC Fund and Jizhong Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AVIC Fund Management and Jizhong Energy Resources, you can compare the effects of market volatilities on AVIC Fund and Jizhong Energy 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 AVIC Fund with a short position of Jizhong Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVIC Fund and Jizhong Energy.

Diversification Opportunities for AVIC Fund and Jizhong Energy

0.61

Correlation Coefficient

AVIC Fund  Jizhong Energy

Poor diversification

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

Pair Corralation between AVIC Fund and Jizhong Energy

Assuming the 90 days trading horizon AVIC Fund Management is expected to generate 0.2 times more return on investment than Jizhong Energy. However, AVIC Fund Management is 5.02 times less risky than Jizhong Energy. It trades about 0.15 of its potential returns per unit of risk. Jizhong Energy Resources is currently generating about -0.02 per unit of risk. If you would invest  972.00  in AVIC Fund Management on September 27, 2024 and sell it today you would earn a total of  81.00  from holding AVIC Fund Management or generate 8.33% return on investment over 90 days.

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

AVIC Fund Management  vs.  Jizhong Energy Resources

AVIC Fund Management

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jizhong Energy Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jizhong Energy Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jizhong Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AVIC Fund and Jizhong Energy

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

The idea behind AVIC Fund Management and Jizhong Energy Resources 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.