Correlation Between Shanghai Jinfeng and Beijing Jiaman

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

Diversification Opportunities for Shanghai Jinfeng and Beijing Jiaman

0.74

Correlation Coefficient

Shanghai Jinfeng  Beijing Jiaman

Poor diversification

The 3 months correlation between Shanghai and Beijing is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine 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 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 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 Shanghai Jinfeng i.e., Shanghai Jinfeng and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Beijing Jiaman

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to under-perform the Beijing Jiaman. In addition to that, Shanghai Jinfeng is 1.26 times more volatile than Beijing Jiaman Dress. It trades about -0.05 of its total potential returns per unit of risk. Beijing Jiaman Dress is currently generating about 0.02 per unit of volatility. If you would invest  2,082  in Beijing Jiaman Dress on December 26, 2024 and sell it today you would earn a total of  22.00  from holding Beijing Jiaman Dress or generate 1.06% return on investment over 90 days.

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

Shanghai Jinfeng Wine  vs.  Beijing Jiaman Dress

Shanghai Jinfeng Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Jinfeng Wine 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.

Beijing Jiaman Dress

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Jiaman Dress are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Jiaman is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Jinfeng and Beijing Jiaman

The main advantage of trading using opposite Shanghai Jinfeng and Beijing Jiaman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Jinfeng 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 Shanghai Jinfeng Wine 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.