Correlation Between Jiangsu Financial and Zhangjiagang Freetrade

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

Diversification Opportunities for Jiangsu Financial and Zhangjiagang Freetrade

-0.26

Correlation Coefficient

Jiangsu Financial  Zhangjiagang Freetrade

Very good diversification

The 3 months correlation between Jiangsu and Zhangjiagang is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Financial Leasing and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Jiangsu Financial i.e., Jiangsu Financial and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Jiangsu Financial and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Jiangsu Financial Leasing is expected to generate 0.82 times more return on investment than Zhangjiagang Freetrade. However, Jiangsu Financial Leasing is 1.22 times less risky than Zhangjiagang Freetrade. It trades about 0.04 of its potential returns per unit of risk. Zhangjiagang Freetrade Science is currently generating about -0.01 per unit of risk. If you would invest  402.00  in Jiangsu Financial Leasing on October 9, 2024 and sell it today you would earn a total of  116.00  from holding Jiangsu Financial Leasing or generate 28.86% return on investment over 90 days.

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

Jiangsu Financial Leasing  vs.  Zhangjiagang Freetrade Science

Jiangsu Financial Leasing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Financial Leasing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Zhangjiagang Freetrade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Freetrade Science are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhangjiagang Freetrade is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangsu Financial and Zhangjiagang Freetrade

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

The idea behind Jiangsu Financial Leasing and Zhangjiagang Freetrade Science 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.