Correlation Between China Sports and Jiugui Liquor

Can any of the company-specific risk be diversified away by investing in both China Sports and Jiugui Liquor 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 China Sports and Jiugui Liquor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Sports Industry and Jiugui Liquor Co, you can compare the effects of market volatilities on China Sports and Jiugui Liquor 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 China Sports with a short position of Jiugui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Sports and Jiugui Liquor.

Diversification Opportunities for China Sports and Jiugui Liquor

0.94

Correlation Coefficient

China Sports  Jiugui Liquor

Almost no diversification

The 3 months correlation between China and Jiugui is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor and China Sports 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 China Sports Industry are associated (or correlated) with Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of China Sports i.e., China Sports and Jiugui Liquor go up and down completely randomly.

Pair Corralation between China Sports and Jiugui Liquor

Assuming the 90 days trading horizon China Sports Industry is expected to generate 0.85 times more return on investment than Jiugui Liquor. However, China Sports Industry is 1.18 times less risky than Jiugui Liquor. It trades about 0.02 of its potential returns per unit of risk. Jiugui Liquor Co is currently generating about -0.05 per unit of risk. If you would invest  849.00  in China Sports Industry on September 15, 2024 and sell it today you would earn a total of  51.00  from holding China Sports Industry or generate 6.01% return on investment over 90 days.

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

China Sports Industry  vs.  Jiugui Liquor Co

China Sports Industry

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiugui Liquor

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Sports and Jiugui Liquor

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

The idea behind China Sports Industry and Jiugui Liquor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.