Correlation Between Changjiang Jinggong and Techshine Electronics

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

Diversification Opportunities for Changjiang Jinggong and Techshine Electronics

0.66

Correlation Coefficient

Changjiang Jinggong  Techshine Electronics

Poor diversification

The 3 months correlation between Changjiang and Techshine is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and Techshine Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techshine Electronics 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 Techshine Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techshine Electronics has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and Techshine Electronics go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and Techshine Electronics

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to under-perform the Techshine Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Changjiang Jinggong Steel is 1.9 times less risky than Techshine Electronics. The stock trades about -0.41 of its potential returns per unit of risk. The Techshine Electronics Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,009  in Techshine Electronics Co on October 7, 2024 and sell it today you would lose (139.00) from holding Techshine Electronics Co or give up 6.92% 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.  Techshine Electronics Co

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.

Techshine Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techshine Electronics Co 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 Techshine Electronics

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

The idea behind Changjiang Jinggong Steel and Techshine Electronics Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.