Correlation Between Jiangsu Yueda and Rongsheng Petrochemical

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

By analyzing existing cross correlation between Jiangsu Yueda Investment and Rongsheng Petrochemical Co, you can compare the effects of market volatilities on Jiangsu Yueda and Rongsheng Petrochemical 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 Jiangsu Yueda with a short position of Rongsheng Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Yueda and Rongsheng Petrochemical.

Diversification Opportunities for Jiangsu Yueda and Rongsheng Petrochemical

0.53

Correlation Coefficient

Jiangsu Yueda  Rongsheng Petrochemical

Very weak diversification

The 3 months correlation between Jiangsu and Rongsheng is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yueda Investment and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and Jiangsu Yueda 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 Jiangsu Yueda Investment are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of Jiangsu Yueda i.e., Jiangsu Yueda and Rongsheng Petrochemical go up and down completely randomly.

Pair Corralation between Jiangsu Yueda and Rongsheng Petrochemical

Assuming the 90 days trading horizon Jiangsu Yueda Investment is expected to generate 1.77 times more return on investment than Rongsheng Petrochemical. However, Jiangsu Yueda is 1.77 times more volatile than Rongsheng Petrochemical Co. It trades about 0.05 of its potential returns per unit of risk. Rongsheng Petrochemical Co is currently generating about -0.04 per unit of risk. If you would invest  415.00  in Jiangsu Yueda Investment on October 22, 2024 and sell it today you would earn a total of  26.00  from holding Jiangsu Yueda Investment or generate 6.27% return on investment over 90 days.

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

Jiangsu Yueda Investment  vs.  Rongsheng Petrochemical Co

Jiangsu Yueda Investment

Risk-Adjusted Performance

4 of 100

Insignificant

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

Rongsheng Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jiangsu Yueda and Rongsheng Petrochemical

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

The idea behind Jiangsu Yueda Investment and Rongsheng Petrochemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.