Correlation Between Xiamen Bank and Zhejiang JIULI

Can any of the company-specific risk be diversified away by investing in both Xiamen Bank and Zhejiang JIULI 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 Xiamen Bank and Zhejiang JIULI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiamen Bank Co and Zhejiang JIULI Hi tech, you can compare the effects of market volatilities on Xiamen Bank and Zhejiang JIULI 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 Xiamen Bank with a short position of Zhejiang JIULI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Bank and Zhejiang JIULI.

Diversification Opportunities for Xiamen Bank and Zhejiang JIULI

0.7

Correlation Coefficient

Xiamen Bank  Zhejiang JIULI

Poor diversification

The 3 months correlation between Xiamen and Zhejiang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Zhejiang JIULI Hi tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang JIULI Hi and Xiamen Bank 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 Xiamen Bank Co are associated (or correlated) with Zhejiang JIULI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang JIULI Hi has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Zhejiang JIULI go up and down completely randomly.

Pair Corralation between Xiamen Bank and Zhejiang JIULI

Assuming the 90 days trading horizon Xiamen Bank is expected to generate 1.1 times less return on investment than Zhejiang JIULI. But when comparing it to its historical volatility, Xiamen Bank Co is 1.28 times less risky than Zhejiang JIULI. It trades about 0.05 of its potential returns per unit of risk. Zhejiang JIULI Hi tech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,992  in Zhejiang JIULI Hi tech on October 5, 2024 and sell it today you would earn a total of  305.00  from holding Zhejiang JIULI Hi tech or generate 15.31% return on investment over 90 days.

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

Xiamen Bank Co  vs.  Zhejiang JIULI Hi tech

Xiamen Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhejiang JIULI Hi

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Xiamen Bank and Zhejiang JIULI

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

The idea behind Xiamen Bank Co and Zhejiang JIULI Hi tech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.