Correlation Between Hwabao WP and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both Hwabao WP and Jiangyin Jianghua 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 Hwabao WP and Jiangyin Jianghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hwabao WP CSI and Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on Hwabao WP and Jiangyin Jianghua 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 Hwabao WP with a short position of Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwabao WP and Jiangyin Jianghua.

Diversification Opportunities for Hwabao WP and Jiangyin Jianghua

0.41

Correlation Coefficient

Hwabao WP  Jiangyin Jianghua

Very weak diversification

The 3 months correlation between Hwabao and Jiangyin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and Hwabao WP 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 Hwabao WP CSI are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Hwabao WP i.e., Hwabao WP and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Hwabao WP and Jiangyin Jianghua

Assuming the 90 days trading horizon Hwabao WP is expected to generate 1.83 times less return on investment than Jiangyin Jianghua. But when comparing it to its historical volatility, Hwabao WP CSI is 1.63 times less risky than Jiangyin Jianghua. It trades about 0.01 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,650  in Jiangyin Jianghua Microelectronics on October 7, 2024 and sell it today you would lose (97.00) from holding Jiangyin Jianghua Microelectronics or give up 5.88% of portfolio value over 90 days.

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

Hwabao WP CSI  vs.  Jiangyin Jianghua Microelectro

Hwabao WP CSI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangyin Jianghua

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangyin Jianghua Microelectronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangyin Jianghua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hwabao WP and Jiangyin Jianghua

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

The idea behind Hwabao WP CSI and Jiangyin Jianghua 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.