Correlation Between Shandong Publishing and Jiugui Liquor

Can any of the company-specific risk be diversified away by investing in both Shandong Publishing and Jiugui Liquor 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 Shandong Publishing and Jiugui Liquor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Publishing Media and Jiugui Liquor Co, you can compare the effects of market volatilities on Shandong Publishing and Jiugui Liquor 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 Shandong Publishing with a short position of Jiugui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and Jiugui Liquor.

Diversification Opportunities for Shandong Publishing and Jiugui Liquor

-0.58

Correlation Coefficient

Shandong Publishing  Jiugui Liquor

Excellent diversification

The 3 months correlation between Shandong and Jiugui is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Jiugui Liquor go up and down completely randomly.

Pair Corralation between Shandong Publishing and Jiugui Liquor

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Jiugui Liquor. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.3 times less risky than Jiugui Liquor. The stock trades about -0.01 of its potential returns per unit of risk. The Jiugui Liquor Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,637  in Jiugui Liquor Co on September 22, 2024 and sell it today you would earn a total of  1,040  from holding Jiugui Liquor Co or generate 22.43% return on investment over 90 days.

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

Shandong Publishing Media  vs.  Jiugui Liquor Co

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiugui Liquor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and Jiugui Liquor

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

The idea behind Shandong Publishing Media and Jiugui Liquor 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.

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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.