Correlation Between Sailun Jinyu and UE Furniture

Can any of the company-specific risk be diversified away by investing in both Sailun Jinyu and UE Furniture 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 Sailun Jinyu and UE Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sailun Jinyu Group and UE Furniture Co, you can compare the effects of market volatilities on Sailun Jinyu and UE Furniture 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 Sailun Jinyu with a short position of UE Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sailun Jinyu and UE Furniture.

Diversification Opportunities for Sailun Jinyu and UE Furniture

0.39

Correlation Coefficient

Sailun Jinyu  UE Furniture

Weak diversification

The 3 months correlation between Sailun and 603600 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sailun Jinyu Group and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture and Sailun Jinyu 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 Sailun Jinyu Group are associated (or correlated) with UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Sailun Jinyu i.e., Sailun Jinyu and UE Furniture go up and down completely randomly.

Pair Corralation between Sailun Jinyu and UE Furniture

Assuming the 90 days trading horizon Sailun Jinyu Group is expected to generate 0.77 times more return on investment than UE Furniture. However, Sailun Jinyu Group is 1.3 times less risky than UE Furniture. It trades about 0.03 of its potential returns per unit of risk. UE Furniture Co is currently generating about 0.02 per unit of risk. If you would invest  1,438  in Sailun Jinyu Group on December 26, 2024 and sell it today you would earn a total of  35.00  from holding Sailun Jinyu Group or generate 2.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Sailun Jinyu Group  vs.  UE Furniture Co

Sailun Jinyu Group

Risk-Adjusted Performance

Weak

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

UE Furniture

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UE Furniture Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UE Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sailun Jinyu and UE Furniture

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

The idea behind Sailun Jinyu Group and UE Furniture 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.