Correlation Between Jiangsu Flowers and Huafa Industrial

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

By analyzing existing cross correlation between Jiangsu Flowers King and Huafa Industrial Co, you can compare the effects of market volatilities on Jiangsu Flowers and Huafa Industrial 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 Jiangsu Flowers with a short position of Huafa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Flowers and Huafa Industrial.

Diversification Opportunities for Jiangsu Flowers and Huafa Industrial

0.01

Correlation Coefficient

Jiangsu Flowers  Huafa Industrial

Significant diversification

The 3 months correlation between Jiangsu and Huafa is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Flowers King and Huafa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huafa Industrial and Jiangsu Flowers 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 Jiangsu Flowers King are associated (or correlated) with Huafa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huafa Industrial has no effect on the direction of Jiangsu Flowers i.e., Jiangsu Flowers and Huafa Industrial go up and down completely randomly.

Pair Corralation between Jiangsu Flowers and Huafa Industrial

Assuming the 90 days trading horizon Jiangsu Flowers King is expected to generate 1.36 times more return on investment than Huafa Industrial. However, Jiangsu Flowers is 1.36 times more volatile than Huafa Industrial Co. It trades about 0.08 of its potential returns per unit of risk. Huafa Industrial Co is currently generating about -0.03 per unit of risk. If you would invest  457.00  in Jiangsu Flowers King on October 9, 2024 and sell it today you would earn a total of  707.00  from holding Jiangsu Flowers King or generate 154.7% return on investment over 90 days.

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

Jiangsu Flowers King  vs.  Huafa Industrial Co

Jiangsu Flowers King

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Flowers King are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Flowers sustained solid returns over the last few months and may actually be approaching a breakup point.

Huafa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huafa Industrial Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jiangsu Flowers and Huafa Industrial

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

The idea behind Jiangsu Flowers King and Huafa Industrial Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.