Correlation Between Changjiang Jinggong and Beijing Jiaman

Can any of the company-specific risk be diversified away by investing in both Changjiang Jinggong and Beijing Jiaman 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 Beijing Jiaman 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 Beijing Jiaman Dress, you can compare the effects of market volatilities on Changjiang Jinggong and Beijing Jiaman 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 Beijing Jiaman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Jinggong and Beijing Jiaman.

Diversification Opportunities for Changjiang Jinggong and Beijing Jiaman

0.87

Correlation Coefficient

Changjiang Jinggong  Beijing Jiaman

Very poor diversification

The 3 months correlation between Changjiang and Beijing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and Beijing Jiaman Dress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Jiaman Dress 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 Beijing Jiaman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Jiaman Dress has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and Beijing Jiaman

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to generate 0.8 times more return on investment than Beijing Jiaman. However, Changjiang Jinggong Steel is 1.25 times less risky than Beijing Jiaman. It trades about 0.22 of its potential returns per unit of risk. Beijing Jiaman Dress is currently generating about 0.14 per unit of risk. If you would invest  238.00  in Changjiang Jinggong Steel on September 4, 2024 and sell it today you would earn a total of  81.00  from holding Changjiang Jinggong Steel or generate 34.03% return on investment over 90 days.

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

Changjiang Jinggong Steel  vs.  Beijing Jiaman Dress

Changjiang Jinggong Steel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Jinggong Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Jinggong sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Jiaman Dress

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Jiaman Dress are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Jiaman sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changjiang Jinggong and Beijing Jiaman

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

The idea behind Changjiang Jinggong Steel and Beijing Jiaman Dress 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 Global Correlations module to find global opportunities by holding instruments from different markets.