Correlation Between Jiangsu Financial and Shan Dong

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

By analyzing existing cross correlation between Jiangsu Financial Leasing and Shan Dong Dong E, you can compare the effects of market volatilities on Jiangsu Financial and Shan Dong 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 Financial with a short position of Shan Dong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Financial and Shan Dong.

Diversification Opportunities for Jiangsu Financial and Shan Dong

0.88

Correlation Coefficient

Jiangsu Financial  Shan Dong

Very poor diversification

The 3 months correlation between Jiangsu and Shan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Financial Leasing and Shan Dong Dong E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Dong Dong and Jiangsu Financial 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 Financial Leasing are associated (or correlated) with Shan Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Dong Dong has no effect on the direction of Jiangsu Financial i.e., Jiangsu Financial and Shan Dong go up and down completely randomly.

Pair Corralation between Jiangsu Financial and Shan Dong

Assuming the 90 days trading horizon Jiangsu Financial Leasing is expected to under-perform the Shan Dong. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Financial Leasing is 1.07 times less risky than Shan Dong. The stock trades about -0.06 of its potential returns per unit of risk. The Shan Dong Dong E is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,015  in Shan Dong Dong E on September 22, 2024 and sell it today you would earn a total of  305.00  from holding Shan Dong Dong E or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.78%
Values	Daily Returns

Jiangsu Financial Leasing  vs.  Shan Dong Dong E

Jiangsu Financial Leasing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Financial Leasing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Shan Dong Dong

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shan Dong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Financial and Shan Dong

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

The idea behind Jiangsu Financial Leasing and Shan Dong Dong E 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.