Correlation Between Sinomach General and Jiangsu Jinling

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

By analyzing existing cross correlation between Sinomach General Machinery and Jiangsu Jinling Sports, you can compare the effects of market volatilities on Sinomach General and Jiangsu Jinling 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 Sinomach General with a short position of Jiangsu Jinling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomach General and Jiangsu Jinling.

Diversification Opportunities for Sinomach General and Jiangsu Jinling

0.82

Correlation Coefficient

Sinomach General  Jiangsu Jinling

Very poor diversification

The 3 months correlation between Sinomach and Jiangsu is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach General Machinery and Jiangsu Jinling Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jinling Sports and Sinomach General 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 Sinomach General Machinery are associated (or correlated) with Jiangsu Jinling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jinling Sports has no effect on the direction of Sinomach General i.e., Sinomach General and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Sinomach General and Jiangsu Jinling

Assuming the 90 days trading horizon Sinomach General Machinery is expected to under-perform the Jiangsu Jinling. But the stock apears to be less risky and, when comparing its historical volatility, Sinomach General Machinery is 1.7 times less risky than Jiangsu Jinling. The stock trades about -0.1 of its potential returns per unit of risk. The Jiangsu Jinling Sports is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,459  in Jiangsu Jinling Sports on December 4, 2024 and sell it today you would lose (99.00) from holding Jiangsu Jinling Sports or give up 6.79% of portfolio value over 90 days.

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

Sinomach General Machinery  vs.  Jiangsu Jinling Sports

Sinomach General Mac

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinomach General Machinery 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.

Jiangsu Jinling Sports

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Jinling Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangsu Jinling is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sinomach General and Jiangsu Jinling

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

The idea behind Sinomach General Machinery and Jiangsu Jinling Sports 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.