Correlation Between Shanxi Lanhua and JiShi Media

Can any of the company-specific risk be diversified away by investing in both Shanxi Lanhua and JiShi Media 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 Shanxi Lanhua and JiShi Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanxi Lanhua Sci Tech and JiShi Media Co, you can compare the effects of market volatilities on Shanxi Lanhua and JiShi Media 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 Shanxi Lanhua with a short position of JiShi Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanxi Lanhua and JiShi Media.

Diversification Opportunities for Shanxi Lanhua and JiShi Media

0.03

Correlation Coefficient

Shanxi Lanhua  JiShi Media

Significant diversification

The 3 months correlation between Shanxi and JiShi is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shanxi Lanhua Sci Tech and JiShi Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JiShi Media and Shanxi Lanhua 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 Shanxi Lanhua Sci Tech are associated (or correlated) with JiShi Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JiShi Media has no effect on the direction of Shanxi Lanhua i.e., Shanxi Lanhua and JiShi Media go up and down completely randomly.

Pair Corralation between Shanxi Lanhua and JiShi Media

Assuming the 90 days trading horizon Shanxi Lanhua Sci Tech is expected to under-perform the JiShi Media. But the stock apears to be less risky and, when comparing its historical volatility, Shanxi Lanhua Sci Tech is 3.35 times less risky than JiShi Media. The stock trades about -0.18 of its potential returns per unit of risk. The JiShi Media Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  187.00  in JiShi Media Co on December 30, 2024 and sell it today you would earn a total of  3.00  from holding JiShi Media Co or generate 1.6% return on investment over 90 days.

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

Shanxi Lanhua Sci Tech  vs.  JiShi Media Co

Shanxi Lanhua Sci

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanxi Lanhua Sci Tech 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.

JiShi Media

Risk-Adjusted Performance

Weak

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

Pair Trading with Shanxi Lanhua and JiShi Media

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

The idea behind Shanxi Lanhua Sci Tech and JiShi Media Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.