Correlation Between Western Mining and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both Western Mining and Jiangyin Jianghua 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 Western Mining and Jiangyin Jianghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Mining Co and Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on Western Mining and Jiangyin Jianghua 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 Western Mining with a short position of Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Mining and Jiangyin Jianghua.

Diversification Opportunities for Western Mining and Jiangyin Jianghua

-0.24

Correlation Coefficient

Western Mining  Jiangyin Jianghua

Very good diversification

The 3 months correlation between Western and Jiangyin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Mining Co and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and Western Mining 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 Western Mining Co are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Western Mining i.e., Western Mining and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Western Mining and Jiangyin Jianghua

Assuming the 90 days trading horizon Western Mining Co is expected to generate 0.4 times more return on investment than Jiangyin Jianghua. However, Western Mining Co is 2.49 times less risky than Jiangyin Jianghua. It trades about -0.08 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about -0.29 per unit of risk. If you would invest  1,665  in Western Mining Co on September 29, 2024 and sell it today you would lose (42.00) from holding Western Mining Co or give up 2.52% of portfolio value over 90 days.

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

Western Mining Co  vs.  Jiangyin Jianghua Microelectro

Western Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Mining 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangyin Jianghua

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangyin Jianghua Microelectronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangyin Jianghua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Mining and Jiangyin Jianghua

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

The idea behind Western Mining Co and Jiangyin Jianghua Microelectronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.