Correlation Between Jiangsu Yueda and Shandong Rike

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

Diversification Opportunities for Jiangsu Yueda and Shandong Rike

0.82

Correlation Coefficient

Jiangsu Yueda  Shandong Rike

Very poor diversification

The 3 months correlation between Jiangsu and Shandong is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yueda Investment and Shandong Rike Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Rike Chemical 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 Shandong Rike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Rike Chemical has no effect on the direction of Jiangsu Yueda i.e., Jiangsu Yueda and Shandong Rike go up and down completely randomly.

Pair Corralation between Jiangsu Yueda and Shandong Rike

Assuming the 90 days trading horizon Jiangsu Yueda Investment is expected to under-perform the Shandong Rike. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Yueda Investment is 1.38 times less risky than Shandong Rike. The stock trades about -0.2 of its potential returns per unit of risk. The Shandong Rike Chemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  629.00  in Shandong Rike Chemical on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Shandong Rike Chemical or generate 0.0% return on investment over 90 days.

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

Jiangsu Yueda Investment  vs.  Shandong Rike Chemical

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.

Shandong Rike Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Rike Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Rike sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Yueda and Shandong Rike

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

The idea behind Jiangsu Yueda Investment and Shandong Rike Chemical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.