Correlation Between China Everbright and Jiangxi Naipu

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

By analyzing existing cross correlation between China Everbright Bank and Jiangxi Naipu Mining, you can compare the effects of market volatilities on China Everbright and Jiangxi Naipu 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 China Everbright with a short position of Jiangxi Naipu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Everbright and Jiangxi Naipu.

Diversification Opportunities for China Everbright and Jiangxi Naipu

0.11

Correlation Coefficient

China Everbright  Jiangxi Naipu

Average diversification

The 3 months correlation between China and Jiangxi is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining and China Everbright 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 China Everbright Bank are associated (or correlated) with Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of China Everbright i.e., China Everbright and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between China Everbright and Jiangxi Naipu

Assuming the 90 days trading horizon China Everbright Bank is expected to generate 1.0 times more return on investment than Jiangxi Naipu. However, China Everbright is 1.0 times more volatile than Jiangxi Naipu Mining. It trades about 0.0 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about -0.3 per unit of risk. If you would invest  374.00  in China Everbright Bank on October 10, 2024 and sell it today you would lose (1.00) from holding China Everbright Bank or give up 0.27% of portfolio value over 90 days.

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

China Everbright Bank  vs.  Jiangxi Naipu Mining

China Everbright Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Everbright is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Everbright and Jiangxi Naipu

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

The idea behind China Everbright Bank and Jiangxi Naipu Mining 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 Anywhere module to track or share privately all of your investments from the convenience of any device.