Correlation Between Jiangyin Jianghua and Shenzhen Hifuture

Can any of the company-specific risk be diversified away by investing in both Jiangyin Jianghua and Shenzhen Hifuture 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 Jiangyin Jianghua and Shenzhen Hifuture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangyin Jianghua Microelectronics and Shenzhen Hifuture Electric, you can compare the effects of market volatilities on Jiangyin Jianghua and Shenzhen Hifuture 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 Jiangyin Jianghua with a short position of Shenzhen Hifuture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangyin Jianghua and Shenzhen Hifuture.

Diversification Opportunities for Jiangyin Jianghua and Shenzhen Hifuture

0.35

Correlation Coefficient

Jiangyin Jianghua  Shenzhen Hifuture

Weak diversification

The 3 months correlation between Jiangyin and Shenzhen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Jiangyin Jianghua Microelectro and Shenzhen Hifuture Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Hifuture and Jiangyin Jianghua 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 Jiangyin Jianghua Microelectronics are associated (or correlated) with Shenzhen Hifuture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Hifuture has no effect on the direction of Jiangyin Jianghua i.e., Jiangyin Jianghua and Shenzhen Hifuture go up and down completely randomly.

Pair Corralation between Jiangyin Jianghua and Shenzhen Hifuture

Assuming the 90 days trading horizon Jiangyin Jianghua Microelectronics is expected to generate 1.27 times more return on investment than Shenzhen Hifuture. However, Jiangyin Jianghua is 1.27 times more volatile than Shenzhen Hifuture Electric. It trades about 0.21 of its potential returns per unit of risk. Shenzhen Hifuture Electric is currently generating about 0.07 per unit of risk. If you would invest  1,228  in Jiangyin Jianghua Microelectronics on September 5, 2024 and sell it today you would earn a total of  729.00  from holding Jiangyin Jianghua Microelectronics or generate 59.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Jiangyin Jianghua Microelectro  vs.  Shenzhen Hifuture Electric

Jiangyin Jianghua

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangyin Jianghua Microelectronics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangyin Jianghua sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Hifuture

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Hifuture Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Hifuture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangyin Jianghua and Shenzhen Hifuture

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

The idea behind Jiangyin Jianghua Microelectronics and Shenzhen Hifuture Electric 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 Transaction History module to view history of all your transactions and understand their impact on performance.