Correlation Between Lingyuan Iron and Jinling Hotel

Can any of the company-specific risk be diversified away by investing in both Lingyuan Iron and Jinling Hotel 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 Lingyuan Iron and Jinling Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lingyuan Iron Steel and Jinling Hotel Corp, you can compare the effects of market volatilities on Lingyuan Iron and Jinling Hotel 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 Lingyuan Iron with a short position of Jinling Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lingyuan Iron and Jinling Hotel.

Diversification Opportunities for Lingyuan Iron and Jinling Hotel

0.91

Correlation Coefficient

Lingyuan Iron  Jinling Hotel

Almost no diversification

The 3 months correlation between Lingyuan and Jinling is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lingyuan Iron Steel and Jinling Hotel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinling Hotel Corp and Lingyuan Iron 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 Lingyuan Iron Steel are associated (or correlated) with Jinling Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinling Hotel Corp has no effect on the direction of Lingyuan Iron i.e., Lingyuan Iron and Jinling Hotel go up and down completely randomly.

Pair Corralation between Lingyuan Iron and Jinling Hotel

Assuming the 90 days trading horizon Lingyuan Iron Steel is expected to under-perform the Jinling Hotel. In addition to that, Lingyuan Iron is 1.26 times more volatile than Jinling Hotel Corp. It trades about -0.09 of its total potential returns per unit of risk. Jinling Hotel Corp is currently generating about -0.07 per unit of volatility. If you would invest  741.00  in Jinling Hotel Corp on December 2, 2024 and sell it today you would lose (64.00) from holding Jinling Hotel Corp or give up 8.64% of portfolio value over 90 days.

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

Lingyuan Iron Steel  vs.  Jinling Hotel Corp

Lingyuan Iron Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lingyuan Iron Steel 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.

Jinling Hotel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinling Hotel Corp 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.

Pair Trading with Lingyuan Iron and Jinling Hotel

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

The idea behind Lingyuan Iron Steel and Jinling Hotel Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.