Correlation Between Pengxin International and Jiangsu Yike

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

By analyzing existing cross correlation between Pengxin International Mining and Jiangsu Yike Food, you can compare the effects of market volatilities on Pengxin International and Jiangsu Yike 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 Pengxin International with a short position of Jiangsu Yike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Jiangsu Yike.

Diversification Opportunities for Pengxin International and Jiangsu Yike

0.54

Correlation Coefficient

Pengxin International  Jiangsu Yike

Very weak diversification

The 3 months correlation between Pengxin and Jiangsu is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Jiangsu Yike Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yike Food and Pengxin International 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 Pengxin International Mining are associated (or correlated) with Jiangsu Yike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yike Food has no effect on the direction of Pengxin International i.e., Pengxin International and Jiangsu Yike go up and down completely randomly.

Pair Corralation between Pengxin International and Jiangsu Yike

Assuming the 90 days trading horizon Pengxin International Mining is expected to generate 0.83 times more return on investment than Jiangsu Yike. However, Pengxin International Mining is 1.21 times less risky than Jiangsu Yike. It trades about 0.04 of its potential returns per unit of risk. Jiangsu Yike Food is currently generating about 0.03 per unit of risk. If you would invest  286.00  in Pengxin International Mining on October 11, 2024 and sell it today you would earn a total of  17.00  from holding Pengxin International Mining or generate 5.94% return on investment over 90 days.

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

Pengxin International Mining  vs.  Jiangsu Yike Food

Pengxin International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pengxin International Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pengxin International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jiangsu Yike Food

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yike Food are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yike may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pengxin International and Jiangsu Yike

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

The idea behind Pengxin International Mining and Jiangsu Yike Food 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.