Correlation Between HeBei Jinniu and Dongxing Sec

Can any of the company-specific risk be diversified away by investing in both HeBei Jinniu and Dongxing Sec 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 HeBei Jinniu and Dongxing Sec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HeBei Jinniu Chemical and Dongxing Sec Co, you can compare the effects of market volatilities on HeBei Jinniu and Dongxing Sec 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 HeBei Jinniu with a short position of Dongxing Sec. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and Dongxing Sec.

Diversification Opportunities for HeBei Jinniu and Dongxing Sec

0.32

Correlation Coefficient

HeBei Jinniu  Dongxing Sec

Weak diversification

The 3 months correlation between HeBei and Dongxing is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical and Dongxing Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongxing Sec and HeBei Jinniu 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 HeBei Jinniu Chemical are associated (or correlated) with Dongxing Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongxing Sec has no effect on the direction of HeBei Jinniu i.e., HeBei Jinniu and Dongxing Sec go up and down completely randomly.

Pair Corralation between HeBei Jinniu and Dongxing Sec

Assuming the 90 days trading horizon HeBei Jinniu is expected to generate 1.75 times less return on investment than Dongxing Sec. In addition to that, HeBei Jinniu is 1.16 times more volatile than Dongxing Sec Co. It trades about 0.02 of its total potential returns per unit of risk. Dongxing Sec Co is currently generating about 0.03 per unit of volatility. If you would invest  849.00  in Dongxing Sec Co on October 11, 2024 and sell it today you would earn a total of  239.00  from holding Dongxing Sec Co or generate 28.15% return on investment over 90 days.

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

HeBei Jinniu Chemical  vs.  Dongxing Sec Co

HeBei Jinniu Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongxing Sec

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongxing Sec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HeBei Jinniu and Dongxing Sec

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

The idea behind HeBei Jinniu Chemical and Dongxing Sec Co 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.