Correlation Between China Publishing and Sichuan Jinshi

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

By analyzing existing cross correlation between China Publishing Media and Sichuan Jinshi Technology, you can compare the effects of market volatilities on China Publishing and Sichuan Jinshi 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 Publishing with a short position of Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Publishing and Sichuan Jinshi.

Diversification Opportunities for China Publishing and Sichuan Jinshi

0.58

Correlation Coefficient

China Publishing  Sichuan Jinshi

Very weak diversification

The 3 months correlation between China and Sichuan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Publishing Media and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and China Publishing 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 Publishing Media are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of China Publishing i.e., China Publishing and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between China Publishing and Sichuan Jinshi

Assuming the 90 days trading horizon China Publishing Media is expected to under-perform the Sichuan Jinshi. But the stock apears to be less risky and, when comparing its historical volatility, China Publishing Media is 1.31 times less risky than Sichuan Jinshi. The stock trades about -0.61 of its potential returns per unit of risk. The Sichuan Jinshi Technology is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  746.00  in Sichuan Jinshi Technology on October 13, 2024 and sell it today you would lose (81.00) from holding Sichuan Jinshi Technology or give up 10.86% of portfolio value over 90 days.

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

China Publishing Media  vs.  Sichuan Jinshi Technology

China Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sichuan Jinshi Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Publishing and Sichuan Jinshi

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

The idea behind China Publishing Media and Sichuan Jinshi Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.