Correlation Between Jiangsu Jiangnan and Chengdu Xinzhu

Can any of the company-specific risk be diversified away by investing in both Jiangsu Jiangnan and Chengdu Xinzhu 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 Jiangsu Jiangnan and Chengdu Xinzhu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Jiangnan Water and Chengdu Xinzhu RoadBridge, you can compare the effects of market volatilities on Jiangsu Jiangnan and Chengdu Xinzhu 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 Jiangsu Jiangnan with a short position of Chengdu Xinzhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Jiangnan and Chengdu Xinzhu.

Diversification Opportunities for Jiangsu Jiangnan and Chengdu Xinzhu

-0.03

Correlation Coefficient

Jiangsu Jiangnan  Chengdu Xinzhu

Good diversification

The 3 months correlation between Jiangsu and Chengdu is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Jiangnan Water and Chengdu Xinzhu RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xinzhu RoadBridge and Jiangsu Jiangnan 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 Jiangsu Jiangnan Water are associated (or correlated) with Chengdu Xinzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xinzhu RoadBridge has no effect on the direction of Jiangsu Jiangnan i.e., Jiangsu Jiangnan and Chengdu Xinzhu go up and down completely randomly.

Pair Corralation between Jiangsu Jiangnan and Chengdu Xinzhu

Assuming the 90 days trading horizon Jiangsu Jiangnan Water is expected to under-perform the Chengdu Xinzhu. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Jiangnan Water is 3.5 times less risky than Chengdu Xinzhu. The stock trades about -0.05 of its potential returns per unit of risk. The Chengdu Xinzhu RoadBridge is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  527.00  in Chengdu Xinzhu RoadBridge on December 26, 2024 and sell it today you would earn a total of  4.00  from holding Chengdu Xinzhu RoadBridge or generate 0.76% return on investment over 90 days.

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

Jiangsu Jiangnan Water  vs.  Chengdu Xinzhu RoadBridge

Jiangsu Jiangnan Water

Risk-Adjusted Performance

Very Weak

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

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Jiangsu Jiangnan and Chengdu Xinzhu

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

The idea behind Jiangsu Jiangnan Water and Chengdu Xinzhu RoadBridge 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.