Correlation Between Shaanxi Construction and Jiangsu Yike

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

By analyzing existing cross correlation between Shaanxi Construction Machinery and Jiangsu Yike Food, you can compare the effects of market volatilities on Shaanxi Construction and Jiangsu Yike 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 Shaanxi Construction with a short position of Jiangsu Yike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Jiangsu Yike.

Diversification Opportunities for Shaanxi Construction and Jiangsu Yike

0.03

Correlation Coefficient

Shaanxi Construction  Jiangsu Yike

Significant diversification

The 3 months correlation between Shaanxi and Jiangsu is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Jiangsu Yike Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yike Food and Shaanxi Construction 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 Shaanxi Construction Machinery are associated (or correlated) with Jiangsu Yike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yike Food has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Jiangsu Yike go up and down completely randomly.

Pair Corralation between Shaanxi Construction and Jiangsu Yike

Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to generate 1.41 times more return on investment than Jiangsu Yike. However, Shaanxi Construction is 1.41 times more volatile than Jiangsu Yike Food. It trades about 0.05 of its potential returns per unit of risk. Jiangsu Yike Food is currently generating about -0.11 per unit of risk. If you would invest  341.00  in Shaanxi Construction Machinery on December 26, 2024 and sell it today you would earn a total of  24.00  from holding Shaanxi Construction Machinery or generate 7.04% return on investment over 90 days.

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

Shaanxi Construction Machinery  vs.  Jiangsu Yike Food

Shaanxi Construction

Risk-Adjusted Performance

Insignificant

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

Jiangsu Yike Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Yike Food 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shaanxi Construction and Jiangsu Yike

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

The idea behind Shaanxi Construction Machinery and Jiangsu Yike Food 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.