Correlation Between Ming Yang and Jiangsu Pacific

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

By analyzing existing cross correlation between Ming Yang Smart and Jiangsu Pacific Quartz, you can compare the effects of market volatilities on Ming Yang and Jiangsu Pacific 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 Ming Yang with a short position of Jiangsu Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and Jiangsu Pacific.

Diversification Opportunities for Ming Yang and Jiangsu Pacific

0.6

Correlation Coefficient

Ming Yang  Jiangsu Pacific

Poor diversification

The 3 months correlation between Ming and Jiangsu is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and Jiangsu Pacific Quartz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Pacific Quartz and Ming Yang 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 Ming Yang Smart are associated (or correlated) with Jiangsu Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Pacific Quartz has no effect on the direction of Ming Yang i.e., Ming Yang and Jiangsu Pacific go up and down completely randomly.

Pair Corralation between Ming Yang and Jiangsu Pacific

Assuming the 90 days trading horizon Ming Yang is expected to generate 3.2 times less return on investment than Jiangsu Pacific. But when comparing it to its historical volatility, Ming Yang Smart is 1.87 times less risky than Jiangsu Pacific. It trades about 0.07 of its potential returns per unit of risk. Jiangsu Pacific Quartz is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,673  in Jiangsu Pacific Quartz on December 13, 2024 and sell it today you would earn a total of  179.00  from holding Jiangsu Pacific Quartz or generate 6.7% return on investment over 90 days.

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

Ming Yang Smart  vs.  Jiangsu Pacific Quartz

Ming Yang Smart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ming Yang Smart 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.

Jiangsu Pacific Quartz

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ming Yang and Jiangsu Pacific

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

The idea behind Ming Yang Smart and Jiangsu Pacific Quartz 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.