Correlation Between HeBei Jinniu and Jiangsu Seagull

Can any of the company-specific risk be diversified away by investing in both HeBei Jinniu and Jiangsu Seagull 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 Jiangsu Seagull 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 Jiangsu Seagull Cooling, you can compare the effects of market volatilities on HeBei Jinniu and Jiangsu Seagull 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 Jiangsu Seagull. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and Jiangsu Seagull.

Diversification Opportunities for HeBei Jinniu and Jiangsu Seagull

0.58

Correlation Coefficient

HeBei Jinniu  Jiangsu Seagull

Very weak diversification

The 3 months correlation between HeBei and Jiangsu is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical and Jiangsu Seagull Cooling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Seagull Cooling 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 Jiangsu Seagull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Seagull Cooling has no effect on the direction of HeBei Jinniu i.e., HeBei Jinniu and Jiangsu Seagull go up and down completely randomly.

Pair Corralation between HeBei Jinniu and Jiangsu Seagull

Assuming the 90 days trading horizon HeBei Jinniu is expected to generate 3.42 times less return on investment than Jiangsu Seagull. In addition to that, HeBei Jinniu is 1.13 times more volatile than Jiangsu Seagull Cooling. It trades about 0.03 of its total potential returns per unit of risk. Jiangsu Seagull Cooling is currently generating about 0.1 per unit of volatility. If you would invest  933.00  in Jiangsu Seagull Cooling on October 7, 2024 and sell it today you would earn a total of  121.00  from holding Jiangsu Seagull Cooling or generate 12.97% return on investment over 90 days.

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

HeBei Jinniu Chemical  vs.  Jiangsu Seagull Cooling

HeBei Jinniu Chemical

Risk-Adjusted Performance

1 of 100

Weak

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

Jiangsu Seagull Cooling

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Seagull Cooling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Seagull sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeBei Jinniu and Jiangsu Seagull

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

The idea behind HeBei Jinniu Chemical and Jiangsu Seagull Cooling 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.