Correlation Between Industrial and Guangdong Jinming

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

By analyzing existing cross correlation between Industrial and Commercial and Guangdong Jinming Machinery, you can compare the effects of market volatilities on Industrial and Guangdong Jinming 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 Industrial with a short position of Guangdong Jinming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Guangdong Jinming.

Diversification Opportunities for Industrial and Guangdong Jinming

-0.55

Correlation Coefficient

Industrial  Guangdong Jinming

Excellent diversification

The 3 months correlation between Industrial and Guangdong is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Guangdong Jinming Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinming and Industrial 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 Industrial and Commercial are associated (or correlated) with Guangdong Jinming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinming has no effect on the direction of Industrial i.e., Industrial and Guangdong Jinming go up and down completely randomly.

Pair Corralation between Industrial and Guangdong Jinming

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.53 times more return on investment than Guangdong Jinming. However, Industrial and Commercial is 1.9 times less risky than Guangdong Jinming. It trades about 0.16 of its potential returns per unit of risk. Guangdong Jinming Machinery is currently generating about -0.1 per unit of risk. If you would invest  613.00  in Industrial and Commercial on December 2, 2024 and sell it today you would earn a total of  74.00  from holding Industrial and Commercial or generate 12.07% return on investment over 90 days.

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

Industrial and Commercial  vs.  Guangdong Jinming Machinery

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jinming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Jinming Machinery 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.

Pair Trading with Industrial and Guangdong Jinming

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

The idea behind Industrial and Commercial and Guangdong Jinming Machinery 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.