Correlation Between Shanghai Jinfeng and Jiangyin Jianghua

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

Diversification Opportunities for Shanghai Jinfeng and Jiangyin Jianghua

0.42

Correlation Coefficient

Shanghai Jinfeng  Jiangyin Jianghua

Very weak diversification

The 3 months correlation between Shanghai and Jiangyin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua 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 Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Shanghai Jinfeng i.e., Shanghai Jinfeng and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Jiangyin Jianghua

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to under-perform the Jiangyin Jianghua. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Jinfeng Wine is 1.79 times less risky than Jiangyin Jianghua. The stock trades about -0.2 of its potential returns per unit of risk. The Jiangyin Jianghua Microelectronics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,821  in Jiangyin Jianghua Microelectronics on December 10, 2024 and sell it today you would lose (30.00) from holding Jiangyin Jianghua Microelectronics or give up 1.65% of portfolio value over 90 days.

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

Shanghai Jinfeng Wine  vs.  Jiangyin Jianghua Microelectro

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.

Jiangyin Jianghua

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangyin Jianghua Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangyin Jianghua 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 Jiangyin Jianghua

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

The idea behind Shanghai Jinfeng Wine and Jiangyin Jianghua Microelectronics 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.