Correlation Between Changjiang Jinggong and Rongcheer Industrial

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

Diversification Opportunities for Changjiang Jinggong and Rongcheer Industrial

0.68

Correlation Coefficient

Changjiang Jinggong  Rongcheer Industrial

Poor diversification

The 3 months correlation between Changjiang and Rongcheer is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and Rongcheer Industrial Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongcheer Industrial 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 Rongcheer Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongcheer Industrial has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and Rongcheer Industrial go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and Rongcheer Industrial

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to generate 0.53 times more return on investment than Rongcheer Industrial. However, Changjiang Jinggong Steel is 1.9 times less risky than Rongcheer Industrial. It trades about -0.01 of its potential returns per unit of risk. Rongcheer Industrial Technology is currently generating about -0.06 per unit of risk. If you would invest  295.00  in Changjiang Jinggong Steel on October 26, 2024 and sell it today you would lose (6.00) from holding Changjiang Jinggong Steel or give up 2.03% 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.  Rongcheer Industrial Technolog

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.

Rongcheer Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongcheer Industrial Technology 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 Changjiang Jinggong and Rongcheer Industrial

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

The idea behind Changjiang Jinggong Steel and Rongcheer Industrial Technology 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.