Correlation Between New China and Jiangyin Jianghua

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

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

Diversification Opportunities for New China and Jiangyin Jianghua

0.68

Correlation Coefficient

New China  Jiangyin Jianghua

Poor diversification

The 3 months correlation between New and Jiangyin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and New China 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 New China Life 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 New China i.e., New China and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between New China and Jiangyin Jianghua

Assuming the 90 days trading horizon New China Life is expected to generate 1.03 times more return on investment than Jiangyin Jianghua. However, New China is 1.03 times more volatile than Jiangyin Jianghua Microelectronics. It trades about 0.01 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about 0.0 per unit of risk. If you would invest  5,130  in New China Life on December 25, 2024 and sell it today you would lose (40.00) from holding New China Life or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

New China Life  vs.  Jiangyin Jianghua Microelectro

New China Life

Risk-Adjusted Performance

Weak

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

Jiangyin Jianghua

Risk-Adjusted Performance

Very Weak

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

Pair Trading with New China and Jiangyin Jianghua

The main advantage of trading using opposite New China and Jiangyin Jianghua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China 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 New China Life 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.