Correlation Between Huafa Industrial and Jonjee Hi

Can any of the company-specific risk be diversified away by investing in both Huafa Industrial and Jonjee Hi 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 Huafa Industrial and Jonjee Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huafa Industrial Co and Jonjee Hi tech Industrial, you can compare the effects of market volatilities on Huafa Industrial and Jonjee Hi 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 Huafa Industrial with a short position of Jonjee Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huafa Industrial and Jonjee Hi.

Diversification Opportunities for Huafa Industrial and Jonjee Hi

0.72

Correlation Coefficient

Huafa Industrial  Jonjee Hi

Poor diversification

The 3 months correlation between Huafa and Jonjee is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Huafa Industrial Co and Jonjee Hi tech Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonjee Hi tech and Huafa Industrial 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 Huafa Industrial Co are associated (or correlated) with Jonjee Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonjee Hi tech has no effect on the direction of Huafa Industrial i.e., Huafa Industrial and Jonjee Hi go up and down completely randomly.

Pair Corralation between Huafa Industrial and Jonjee Hi

Assuming the 90 days trading horizon Huafa Industrial Co is expected to under-perform the Jonjee Hi. In addition to that, Huafa Industrial is 1.01 times more volatile than Jonjee Hi tech Industrial. It trades about -0.19 of its total potential returns per unit of risk. Jonjee Hi tech Industrial is currently generating about -0.17 per unit of volatility. If you would invest  2,363  in Jonjee Hi tech Industrial on December 2, 2024 and sell it today you would lose (346.00) from holding Jonjee Hi tech Industrial or give up 14.64% of portfolio value over 90 days.

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

Huafa Industrial Co  vs.  Jonjee Hi tech Industrial

Huafa Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huafa Industrial Co 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.

Jonjee Hi tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jonjee Hi tech Industrial 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.

Pair Trading with Huafa Industrial and Jonjee Hi

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

The idea behind Huafa Industrial Co and Jonjee Hi tech Industrial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.