Correlation Between China Building and Jilin OLED

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

By analyzing existing cross correlation between China Building Material and Jilin OLED Material, you can compare the effects of market volatilities on China Building and Jilin OLED 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 Building with a short position of Jilin OLED. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Building and Jilin OLED.

Diversification Opportunities for China Building and Jilin OLED

0.34

Correlation Coefficient

China Building  Jilin OLED

Weak diversification

The 3 months correlation between China and Jilin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Building Material and Jilin OLED Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin OLED Material and China Building 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 Building Material are associated (or correlated) with Jilin OLED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin OLED Material has no effect on the direction of China Building i.e., China Building and Jilin OLED go up and down completely randomly.

Pair Corralation between China Building and Jilin OLED

Assuming the 90 days trading horizon China Building Material is expected to under-perform the Jilin OLED. But the stock apears to be less risky and, when comparing its historical volatility, China Building Material is 2.09 times less risky than Jilin OLED. The stock trades about -0.05 of its potential returns per unit of risk. The Jilin OLED Material is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,254  in Jilin OLED Material on December 25, 2024 and sell it today you would lose (79.00) from holding Jilin OLED Material or give up 3.5% of portfolio value over 90 days.

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

China Building Material  vs.  Jilin OLED Material

China Building Material

Risk-Adjusted Performance

Very Weak

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

Jilin OLED Material

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jilin OLED Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jilin OLED 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 Building and Jilin OLED

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

The idea behind China Building Material and Jilin OLED Material 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.