Correlation Between Changchun Engley and Hainan Jinpan

Can any of the company-specific risk be diversified away by investing in both Changchun Engley and Hainan Jinpan 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 Changchun Engley and Hainan Jinpan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changchun Engley Automobile and Hainan Jinpan Smart, you can compare the effects of market volatilities on Changchun Engley and Hainan Jinpan 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 Changchun Engley with a short position of Hainan Jinpan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Engley and Hainan Jinpan.

Diversification Opportunities for Changchun Engley and Hainan Jinpan

0.17

Correlation Coefficient

Changchun Engley  Hainan Jinpan

Average diversification

The 3 months correlation between Changchun and Hainan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Hainan Jinpan Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Jinpan Smart and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Hainan Jinpan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Jinpan Smart has no effect on the direction of Changchun Engley i.e., Changchun Engley and Hainan Jinpan go up and down completely randomly.

Pair Corralation between Changchun Engley and Hainan Jinpan

Assuming the 90 days trading horizon Changchun Engley is expected to generate 11.49 times less return on investment than Hainan Jinpan. But when comparing it to its historical volatility, Changchun Engley Automobile is 2.1 times less risky than Hainan Jinpan. It trades about 0.01 of its potential returns per unit of risk. Hainan Jinpan Smart is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,100  in Hainan Jinpan Smart on December 25, 2024 and sell it today you would earn a total of  245.00  from holding Hainan Jinpan Smart or generate 5.98% return on investment over 90 days.

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

Changchun Engley Automobile  vs.  Hainan Jinpan Smart

Changchun Engley Aut

Risk-Adjusted Performance

Very Weak

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

Hainan Jinpan Smart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Jinpan Smart are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Jinpan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changchun Engley and Hainan Jinpan

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

The idea behind Changchun Engley Automobile and Hainan Jinpan Smart 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.