Correlation Between Hengdian Entertainment and Jinsanjiang Silicon

Can any of the company-specific risk be diversified away by investing in both Hengdian Entertainment and Jinsanjiang Silicon 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 Hengdian Entertainment and Jinsanjiang Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengdian Entertainment Co and Jinsanjiang Silicon Material, you can compare the effects of market volatilities on Hengdian Entertainment and Jinsanjiang Silicon 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 Hengdian Entertainment with a short position of Jinsanjiang Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Jinsanjiang Silicon.

Diversification Opportunities for Hengdian Entertainment and Jinsanjiang Silicon

0.69

Correlation Coefficient

Hengdian Entertainment  Jinsanjiang Silicon

Poor diversification

The 3 months correlation between Hengdian and Jinsanjiang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang Silicon and Hengdian Entertainment 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 Hengdian Entertainment Co are associated (or correlated) with Jinsanjiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang Silicon has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Jinsanjiang Silicon go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Jinsanjiang Silicon

Assuming the 90 days trading horizon Hengdian Entertainment is expected to generate 2.97 times less return on investment than Jinsanjiang Silicon. But when comparing it to its historical volatility, Hengdian Entertainment Co is 1.13 times less risky than Jinsanjiang Silicon. It trades about 0.03 of its potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  874.00  in Jinsanjiang Silicon Material on October 4, 2024 and sell it today you would earn a total of  356.00  from holding Jinsanjiang Silicon Material or generate 40.73% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Jinsanjiang Silicon Material

Hengdian Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengdian Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinsanjiang Silicon

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Hengdian Entertainment and Jinsanjiang Silicon

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

The idea behind Hengdian Entertainment Co and Jinsanjiang Silicon 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.