Correlation Between Jiangsu Financial and Sinofibers Technology

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

Diversification Opportunities for Jiangsu Financial and Sinofibers Technology

0.44

Correlation Coefficient

Jiangsu Financial  Sinofibers Technology

Very weak diversification

The 3 months correlation between Jiangsu and Sinofibers is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Financial Leasing and Sinofibers Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinofibers Technology 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 Sinofibers Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinofibers Technology has no effect on the direction of Jiangsu Financial i.e., Jiangsu Financial and Sinofibers Technology go up and down completely randomly.

Pair Corralation between Jiangsu Financial and Sinofibers Technology

Assuming the 90 days trading horizon Jiangsu Financial Leasing is expected to generate 0.48 times more return on investment than Sinofibers Technology. However, Jiangsu Financial Leasing is 2.1 times less risky than Sinofibers Technology. It trades about -0.06 of its potential returns per unit of risk. Sinofibers Technology Co is currently generating about -0.09 per unit of risk. If you would invest  534.00  in Jiangsu Financial Leasing on October 7, 2024 and sell it today you would lose (17.00) from holding Jiangsu Financial Leasing or give up 3.18% of portfolio value over 90 days.

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

Jiangsu Financial Leasing  vs.  Sinofibers Technology Co

Jiangsu Financial Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinofibers Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinofibers Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jiangsu Financial and Sinofibers Technology

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

The idea behind Jiangsu Financial Leasing and Sinofibers Technology Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.