Correlation Between Cultural Investment and Jinlong Machinery

Can any of the company-specific risk be diversified away by investing in both Cultural Investment and Jinlong Machinery 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 Cultural Investment and Jinlong Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cultural Investment Holdings and Jinlong Machinery Electronic, you can compare the effects of market volatilities on Cultural Investment and Jinlong Machinery 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 Cultural Investment with a short position of Jinlong Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cultural Investment and Jinlong Machinery.

Diversification Opportunities for Cultural Investment and Jinlong Machinery

0.33

Correlation Coefficient

Cultural Investment  Jinlong Machinery

Weak diversification

The 3 months correlation between Cultural and Jinlong is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Jinlong Machinery Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinlong Machinery and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Jinlong Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinlong Machinery has no effect on the direction of Cultural Investment i.e., Cultural Investment and Jinlong Machinery go up and down completely randomly.

Pair Corralation between Cultural Investment and Jinlong Machinery

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to generate 0.65 times more return on investment than Jinlong Machinery. However, Cultural Investment Holdings is 1.54 times less risky than Jinlong Machinery. It trades about -0.19 of its potential returns per unit of risk. Jinlong Machinery Electronic is currently generating about -0.13 per unit of risk. If you would invest  220.00  in Cultural Investment Holdings on October 26, 2024 and sell it today you would lose (17.00) from holding Cultural Investment Holdings or give up 7.73% of portfolio value over 90 days.

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

Cultural Investment Holdings  vs.  Jinlong Machinery Electronic

Cultural Investment

Risk-Adjusted Performance

1 of 100

Weak

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

Jinlong Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinlong Machinery Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cultural Investment and Jinlong Machinery

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

The idea behind Cultural Investment Holdings and Jinlong Machinery Electronic 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.