Correlation Between China International and Jiangsu Broadcasting

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

By analyzing existing cross correlation between China International Capital and Jiangsu Broadcasting Cable, you can compare the effects of market volatilities on China International and Jiangsu Broadcasting 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 International with a short position of Jiangsu Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of China International and Jiangsu Broadcasting.

Diversification Opportunities for China International and Jiangsu Broadcasting

0.8

Correlation Coefficient

China International  Jiangsu Broadcasting

Very poor diversification

The 3 months correlation between China and Jiangsu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding China International Capital and Jiangsu Broadcasting Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Broadcasting and China International 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 International Capital are associated (or correlated) with Jiangsu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Broadcasting has no effect on the direction of China International i.e., China International and Jiangsu Broadcasting go up and down completely randomly.

Pair Corralation between China International and Jiangsu Broadcasting

Assuming the 90 days trading horizon China International Capital is expected to generate 2.56 times more return on investment than Jiangsu Broadcasting. However, China International is 2.56 times more volatile than Jiangsu Broadcasting Cable. It trades about 0.18 of its potential returns per unit of risk. Jiangsu Broadcasting Cable is currently generating about 0.04 per unit of risk. If you would invest  3,143  in China International Capital on December 2, 2024 and sell it today you would earn a total of  384.00  from holding China International Capital or generate 12.22% return on investment over 90 days.

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

China International Capital  vs.  Jiangsu Broadcasting Cable

China International

Risk-Adjusted Performance

Very Weak

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

Jiangsu Broadcasting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Broadcasting Cable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China International and Jiangsu Broadcasting

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

The idea behind China International Capital and Jiangsu Broadcasting Cable 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.