Correlation Between Jiangsu Financial and SI TECH

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

Diversification Opportunities for Jiangsu Financial and SI TECH

0.85

Correlation Coefficient

Jiangsu Financial  SI TECH

Very poor diversification

The 3 months correlation between Jiangsu and 300608 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Financial Leasing and SI TECH Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SI TECH Information 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 SI TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SI TECH Information has no effect on the direction of Jiangsu Financial i.e., Jiangsu Financial and SI TECH go up and down completely randomly.

Pair Corralation between Jiangsu Financial and SI TECH

Assuming the 90 days trading horizon Jiangsu Financial is expected to generate 2.04 times less return on investment than SI TECH. But when comparing it to its historical volatility, Jiangsu Financial Leasing is 3.9 times less risky than SI TECH. It trades about 0.19 of its potential returns per unit of risk. SI TECH Information Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,247  in SI TECH Information Technology on September 24, 2024 and sell it today you would earn a total of  73.00  from holding SI TECH Information Technology or generate 5.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Jiangsu Financial Leasing  vs.  SI TECH Information Technology

Jiangsu Financial Leasing

Risk-Adjusted Performance

4 of 100

Insignificant

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

SI TECH Information

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SI TECH Information Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SI TECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Financial and SI TECH

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

The idea behind Jiangsu Financial Leasing and SI TECH Information Technology 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.