Correlation Between Jiangsu Yueda and Fujian Longzhou

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

Diversification Opportunities for Jiangsu Yueda and Fujian Longzhou

0.89

Correlation Coefficient

Jiangsu Yueda  Fujian Longzhou

Very poor diversification

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

Pair Corralation between Jiangsu Yueda and Fujian Longzhou

Assuming the 90 days trading horizon Jiangsu Yueda Investment is expected to generate 0.73 times more return on investment than Fujian Longzhou. However, Jiangsu Yueda Investment is 1.37 times less risky than Fujian Longzhou. It trades about -0.28 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about -0.49 per unit of risk. If you would invest  487.00  in Jiangsu Yueda Investment on October 8, 2024 and sell it today you would lose (65.00) from holding Jiangsu Yueda Investment or give up 13.35% 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.  Fujian Longzhou Transportation

Jiangsu Yueda Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fujian Longzhou Tran

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Longzhou Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jiangsu Yueda and Fujian Longzhou

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

The idea behind Jiangsu Yueda Investment and Fujian Longzhou Transportation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.