Correlation Between Hengdian Entertainment and Jiangsu Yueda

Can any of the company-specific risk be diversified away by investing in both Hengdian Entertainment and Jiangsu Yueda 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 Jiangsu Yueda 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 Jiangsu Yueda Investment, you can compare the effects of market volatilities on Hengdian Entertainment and Jiangsu Yueda 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 Jiangsu Yueda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Jiangsu Yueda.

Diversification Opportunities for Hengdian Entertainment and Jiangsu Yueda

0.23

Correlation Coefficient

Hengdian Entertainment  Jiangsu Yueda

Modest diversification

The 3 months correlation between Hengdian and Jiangsu is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Jiangsu Yueda Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yueda Investment 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 Jiangsu Yueda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yueda Investment has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Jiangsu Yueda go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Jiangsu Yueda

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to under-perform the Jiangsu Yueda. In addition to that, Hengdian Entertainment is 2.45 times more volatile than Jiangsu Yueda Investment. It trades about -0.06 of its total potential returns per unit of risk. Jiangsu Yueda Investment is currently generating about 0.1 per unit of volatility. If you would invest  450.00  in Jiangsu Yueda Investment on December 27, 2024 and sell it today you would earn a total of  36.00  from holding Jiangsu Yueda Investment or generate 8.0% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Jiangsu Yueda Investment

Hengdian Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengdian Entertainment 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangsu Yueda Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yueda Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yueda may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hengdian Entertainment and Jiangsu Yueda

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

The idea behind Hengdian Entertainment Co and Jiangsu Yueda Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.