Correlation Between Tonghua Grape and Shanghai Jin

Can any of the company-specific risk be diversified away by investing in both Tonghua Grape and Shanghai Jin 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 Tonghua Grape and Shanghai Jin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tonghua Grape Wine and Shanghai Jin Jiang, you can compare the effects of market volatilities on Tonghua Grape and Shanghai Jin 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 Tonghua Grape with a short position of Shanghai Jin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tonghua Grape and Shanghai Jin.

Diversification Opportunities for Tonghua Grape and Shanghai Jin

0.13

Correlation Coefficient

Tonghua Grape  Shanghai Jin

Average diversification

The 3 months correlation between Tonghua and Shanghai is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tonghua Grape Wine and Shanghai Jin Jiang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jin Jiang and Tonghua Grape 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 Tonghua Grape Wine are associated (or correlated) with Shanghai Jin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jin Jiang has no effect on the direction of Tonghua Grape i.e., Tonghua Grape and Shanghai Jin go up and down completely randomly.

Pair Corralation between Tonghua Grape and Shanghai Jin

Assuming the 90 days trading horizon Tonghua Grape Wine is expected to under-perform the Shanghai Jin. In addition to that, Tonghua Grape is 2.85 times more volatile than Shanghai Jin Jiang. It trades about -0.17 of its total potential returns per unit of risk. Shanghai Jin Jiang is currently generating about -0.03 per unit of volatility. If you would invest  151.00  in Shanghai Jin Jiang on October 6, 2024 and sell it today you would lose (1.00) from holding Shanghai Jin Jiang or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tonghua Grape Wine  vs.  Shanghai Jin Jiang

Tonghua Grape Wine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tonghua Grape Wine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tonghua Grape is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Jin Jiang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Jin Jiang 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 Tonghua Grape and Shanghai Jin

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

The idea behind Tonghua Grape Wine and Shanghai Jin Jiang 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.