Correlation Between Shandong Gold and Jilin OLED

Can any of the company-specific risk be diversified away by investing in both Shandong Gold and Jilin OLED 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 Shandong Gold and Jilin OLED into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Gold Mining and Jilin OLED Material, you can compare the effects of market volatilities on Shandong Gold and Jilin OLED 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 Shandong Gold with a short position of Jilin OLED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and Jilin OLED.

Diversification Opportunities for Shandong Gold and Jilin OLED

0.06

Correlation Coefficient

Shandong Gold  Jilin OLED

Significant diversification

The 3 months correlation between Shandong and Jilin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Jilin OLED Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin OLED Material and Shandong Gold 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 Shandong Gold Mining are associated (or correlated) with Jilin OLED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin OLED Material has no effect on the direction of Shandong Gold i.e., Shandong Gold and Jilin OLED go up and down completely randomly.

Pair Corralation between Shandong Gold and Jilin OLED

Assuming the 90 days trading horizon Shandong Gold Mining is expected to generate 0.42 times more return on investment than Jilin OLED. However, Shandong Gold Mining is 2.37 times less risky than Jilin OLED. It trades about 0.14 of its potential returns per unit of risk. Jilin OLED Material is currently generating about 0.05 per unit of risk. If you would invest  2,344  in Shandong Gold Mining on October 22, 2024 and sell it today you would earn a total of  87.00  from holding Shandong Gold Mining or generate 3.71% return on investment over 90 days.

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

Shandong Gold Mining  vs.  Jilin OLED Material

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining 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.

Jilin OLED Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shandong Gold and Jilin OLED

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

The idea behind Shandong Gold Mining and Jilin OLED Material 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.