Correlation Between Changjiang Jinggong and Vats Liquor

Can any of the company-specific risk be diversified away by investing in both Changjiang Jinggong and Vats Liquor 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 Changjiang Jinggong and Vats Liquor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changjiang Jinggong Steel and Vats Liquor Chain, you can compare the effects of market volatilities on Changjiang Jinggong and Vats Liquor 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 Changjiang Jinggong with a short position of Vats Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Jinggong and Vats Liquor.

Diversification Opportunities for Changjiang Jinggong and Vats Liquor

0.65

Correlation Coefficient

Changjiang Jinggong  Vats Liquor

Poor diversification

The 3 months correlation between Changjiang and Vats is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and Vats Liquor Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vats Liquor Chain and Changjiang Jinggong 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 Changjiang Jinggong Steel are associated (or correlated) with Vats Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vats Liquor Chain has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and Vats Liquor go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and Vats Liquor

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to generate 0.45 times more return on investment than Vats Liquor. However, Changjiang Jinggong Steel is 2.22 times less risky than Vats Liquor. It trades about -0.04 of its potential returns per unit of risk. Vats Liquor Chain is currently generating about -0.07 per unit of risk. If you would invest  308.00  in Changjiang Jinggong Steel on October 8, 2024 and sell it today you would lose (18.00) from holding Changjiang Jinggong Steel or give up 5.84% of portfolio value over 90 days.

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

Changjiang Jinggong Steel  vs.  Vats Liquor Chain

Changjiang Jinggong Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Changjiang Jinggong and Vats Liquor

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

The idea behind Changjiang Jinggong Steel and Vats Liquor Chain 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.