Correlation Between Sinotrans and Jahen Household

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

By analyzing existing cross correlation between Sinotrans Ltd Class and Jahen Household Products, you can compare the effects of market volatilities on Sinotrans and Jahen Household 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 Sinotrans with a short position of Jahen Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and Jahen Household.

Diversification Opportunities for Sinotrans and Jahen Household

0.34

Correlation Coefficient

Sinotrans  Jahen Household

Weak diversification

The 3 months correlation between Sinotrans and Jahen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Jahen Household Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahen Household Products and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with Jahen Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahen Household Products has no effect on the direction of Sinotrans i.e., Sinotrans and Jahen Household go up and down completely randomly.

Pair Corralation between Sinotrans and Jahen Household

Assuming the 90 days trading horizon Sinotrans is expected to generate 24.7 times less return on investment than Jahen Household. But when comparing it to its historical volatility, Sinotrans Ltd Class is 5.26 times less risky than Jahen Household. It trades about 0.01 of its potential returns per unit of risk. Jahen Household Products is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,591  in Jahen Household Products on October 5, 2024 and sell it today you would lose (3.00) from holding Jahen Household Products or give up 0.19% of portfolio value over 90 days.

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

Sinotrans Ltd Class  vs.  Jahen Household Products

Sinotrans Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jahen Household Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jahen Household Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahen Household may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sinotrans and Jahen Household

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

The idea behind Sinotrans Ltd Class and Jahen Household Products 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.