Correlation Between Hunan Tyen and Jiangsu Jinling

Can any of the company-specific risk be diversified away by investing in both Hunan Tyen and Jiangsu Jinling 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 Hunan Tyen and Jiangsu Jinling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Tyen Machinery and Jiangsu Jinling Sports, you can compare the effects of market volatilities on Hunan Tyen and Jiangsu Jinling 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 Hunan Tyen with a short position of Jiangsu Jinling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and Jiangsu Jinling.

Diversification Opportunities for Hunan Tyen and Jiangsu Jinling

0.54

Correlation Coefficient

Hunan Tyen  Jiangsu Jinling

Very weak diversification

The 3 months correlation between Hunan and Jiangsu is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and Jiangsu Jinling Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jinling Sports and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with Jiangsu Jinling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jinling Sports has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Hunan Tyen and Jiangsu Jinling

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 1.15 times more return on investment than Jiangsu Jinling. However, Hunan Tyen is 1.15 times more volatile than Jiangsu Jinling Sports. It trades about 0.05 of its potential returns per unit of risk. Jiangsu Jinling Sports is currently generating about 0.0 per unit of risk. If you would invest  478.00  in Hunan Tyen Machinery on October 11, 2024 and sell it today you would earn a total of  33.00  from holding Hunan Tyen Machinery or generate 6.9% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  Jiangsu Jinling Sports

Hunan Tyen Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jiangsu Jinling Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hunan Tyen and Jiangsu Jinling

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

The idea behind Hunan Tyen Machinery and Jiangsu Jinling Sports 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.