Correlation Between China Railway and Jiugui Liquor

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

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

Diversification Opportunities for China Railway and Jiugui Liquor

0.85

Correlation Coefficient

China Railway  Jiugui Liquor

Very poor diversification

The 3 months correlation between China and Jiugui is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor and China Railway 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 China Railway Construction 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 China Railway i.e., China Railway and Jiugui Liquor go up and down completely randomly.

Pair Corralation between China Railway and Jiugui Liquor

Assuming the 90 days trading horizon China Railway Construction is expected to under-perform the Jiugui Liquor. But the stock apears to be less risky and, when comparing its historical volatility, China Railway Construction is 2.42 times less risky than Jiugui Liquor. The stock trades about -0.22 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  5,572  in Jiugui Liquor Co on December 25, 2024 and sell it today you would lose (622.00) from holding Jiugui Liquor Co or give up 11.16% of portfolio value over 90 days.

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

China Railway Construction  vs.  Jiugui Liquor Co

China Railway Constr

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Construction 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.

Jiugui Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiugui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Railway and Jiugui Liquor

The main advantage of trading using opposite China Railway and Jiugui Liquor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway 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 China Railway Construction 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.