Correlation Between Shanghai Jinfeng and Jilin Jlu

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

By analyzing existing cross correlation between Shanghai Jinfeng Wine and Jilin Jlu Communication, you can compare the effects of market volatilities on Shanghai Jinfeng and Jilin Jlu 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 Shanghai Jinfeng with a short position of Jilin Jlu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Jinfeng and Jilin Jlu.

Diversification Opportunities for Shanghai Jinfeng and Jilin Jlu

0.8

Correlation Coefficient

Shanghai Jinfeng  Jilin Jlu

Very poor diversification

The 3 months correlation between Shanghai and Jilin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu Communication and Shanghai Jinfeng 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 Shanghai Jinfeng Wine are associated (or correlated) with Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of Shanghai Jinfeng i.e., Shanghai Jinfeng and Jilin Jlu go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Jilin Jlu

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to generate 0.97 times more return on investment than Jilin Jlu. However, Shanghai Jinfeng Wine is 1.03 times less risky than Jilin Jlu. It trades about 0.03 of its potential returns per unit of risk. Jilin Jlu Communication is currently generating about -0.04 per unit of risk. If you would invest  567.00  in Shanghai Jinfeng Wine on October 1, 2024 and sell it today you would earn a total of  15.00  from holding Shanghai Jinfeng Wine or generate 2.65% return on investment over 90 days.

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

Shanghai Jinfeng Wine  vs.  Jilin Jlu Communication

Shanghai Jinfeng Wine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jinfeng Wine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Jinfeng may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jilin Jlu Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jilin Jlu Communication 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 Shanghai Jinfeng and Jilin Jlu

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

The idea behind Shanghai Jinfeng Wine and Jilin Jlu Communication 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.