Correlation Between Jiangsu Yueda and Shanghai Yaoji

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

Diversification Opportunities for Jiangsu Yueda and Shanghai Yaoji

0.89

Correlation Coefficient

Jiangsu Yueda  Shanghai Yaoji

Very poor diversification

The 3 months correlation between Jiangsu and Shanghai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yueda Investment and Shanghai Yaoji Playing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yaoji Playing 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 Shanghai Yaoji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yaoji Playing has no effect on the direction of Jiangsu Yueda i.e., Jiangsu Yueda and Shanghai Yaoji go up and down completely randomly.

Pair Corralation between Jiangsu Yueda and Shanghai Yaoji

Assuming the 90 days trading horizon Jiangsu Yueda Investment is expected to generate 0.59 times more return on investment than Shanghai Yaoji. However, Jiangsu Yueda Investment is 1.69 times less risky than Shanghai Yaoji. It trades about -0.03 of its potential returns per unit of risk. Shanghai Yaoji Playing is currently generating about -0.03 per unit of risk. If you would invest  458.00  in Jiangsu Yueda Investment on September 24, 2024 and sell it today you would lose (11.00) from holding Jiangsu Yueda Investment or give up 2.4% of portfolio value over 90 days.

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

Jiangsu Yueda Investment  vs.  Shanghai Yaoji Playing

Jiangsu Yueda Investment

Risk-Adjusted Performance

10 of 100

OK

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

Shanghai Yaoji Playing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yaoji sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Yueda and Shanghai Yaoji

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

The idea behind Jiangsu Yueda Investment and Shanghai Yaoji Playing 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.