Correlation Between Caihong Display and Jiangsu Jinling

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

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

Diversification Opportunities for Caihong Display and Jiangsu Jinling

-0.25

Correlation Coefficient

Caihong Display  Jiangsu Jinling

Very good diversification

The 3 months correlation between Caihong and Jiangsu is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Caihong Display Devices 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 Caihong Display 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 Caihong Display Devices 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 Caihong Display i.e., Caihong Display and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Caihong Display and Jiangsu Jinling

Assuming the 90 days trading horizon Caihong Display Devices is expected to under-perform the Jiangsu Jinling. In addition to that, Caihong Display is 1.02 times more volatile than Jiangsu Jinling Sports. It trades about -0.06 of its total potential returns per unit of risk. Jiangsu Jinling Sports is currently generating about 0.04 per unit of volatility. If you would invest  1,288  in Jiangsu Jinling Sports on December 30, 2024 and sell it today you would earn a total of  60.00  from holding Jiangsu Jinling Sports or generate 4.66% return on investment over 90 days.

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

Caihong Display Devices  vs.  Jiangsu Jinling Sports

Caihong Display Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caihong Display Devices 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.

Jiangsu Jinling Sports

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Caihong Display and Jiangsu Jinling

The main advantage of trading using opposite Caihong Display and Jiangsu Jinling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caihong Display 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 Caihong Display Devices 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.