Correlation Between Shanghai Jinfeng and Cultural Investment

Can any of the company-specific risk be diversified away by investing in both Shanghai Jinfeng and Cultural Investment 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 Cultural Investment 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 Cultural Investment Holdings, you can compare the effects of market volatilities on Shanghai Jinfeng and Cultural Investment 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 Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Jinfeng and Cultural Investment.

Diversification Opportunities for Shanghai Jinfeng and Cultural Investment

0.85

Correlation Coefficient

Shanghai Jinfeng  Cultural Investment

Very poor diversification

The 3 months correlation between Shanghai and Cultural is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment 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 Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Shanghai Jinfeng i.e., Shanghai Jinfeng and Cultural Investment go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Cultural Investment

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to under-perform the Cultural Investment. In addition to that, Shanghai Jinfeng is 1.19 times more volatile than Cultural Investment Holdings. It trades about -0.06 of its total potential returns per unit of risk. Cultural Investment Holdings is currently generating about -0.05 per unit of volatility. If you would invest  228.00  in Cultural Investment Holdings on December 2, 2024 and sell it today you would lose (22.00) from holding Cultural Investment Holdings or give up 9.65% of portfolio value over 90 days.

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

Shanghai Jinfeng Wine  vs.  Cultural Investment Holdings

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.

Cultural Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cultural Investment Holdings 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 Cultural Investment

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

The idea behind Shanghai Jinfeng Wine and Cultural Investment Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.