Correlation Between Chongqing Brewery and Jason Furniture

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Can any of the company-specific risk be diversified away by investing in both Chongqing Brewery and Jason Furniture 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 Chongqing Brewery and Jason Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chongqing Brewery Co and Jason Furniture, you can compare the effects of market volatilities on Chongqing Brewery and Jason Furniture 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 Chongqing Brewery with a short position of Jason Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Brewery and Jason Furniture.

Diversification Opportunities for Chongqing Brewery and Jason Furniture

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Chongqing and Jason is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Brewery Co and Jason Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jason Furniture and Chongqing Brewery 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 Chongqing Brewery Co are associated (or correlated) with Jason Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jason Furniture has no effect on the direction of Chongqing Brewery i.e., Chongqing Brewery and Jason Furniture go up and down completely randomly.

Pair Corralation between Chongqing Brewery and Jason Furniture

Assuming the 90 days trading horizon Chongqing Brewery Co is expected to generate 0.82 times more return on investment than Jason Furniture. However, Chongqing Brewery Co is 1.21 times less risky than Jason Furniture. It trades about -0.08 of its potential returns per unit of risk. Jason Furniture is currently generating about -0.1 per unit of risk. If you would invest  6,075  in Chongqing Brewery Co on October 27, 2024 and sell it today you would lose (634.00) from holding Chongqing Brewery Co or give up 10.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chongqing Brewery Co  vs.  Jason Furniture

 Performance 
       Timeline  
Chongqing Brewery 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chongqing Brewery Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Jason Furniture 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Jason Furniture 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chongqing Brewery and Jason Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chongqing Brewery and Jason Furniture

The main advantage of trading using opposite Chongqing Brewery and Jason Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Brewery position performs unexpectedly, Jason Furniture 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 Jason Furniture will offset losses from the drop in Jason Furniture's long position.
The idea behind Chongqing Brewery Co and Jason Furniture 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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