Correlation Between Shandong Sinoglory and Xiamen Jihong

Can any of the company-specific risk be diversified away by investing in both Shandong Sinoglory and Xiamen Jihong 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 Shandong Sinoglory and Xiamen Jihong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Sinoglory Health and Xiamen Jihong Package, you can compare the effects of market volatilities on Shandong Sinoglory and Xiamen Jihong 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 Shandong Sinoglory with a short position of Xiamen Jihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sinoglory and Xiamen Jihong.

Diversification Opportunities for Shandong Sinoglory and Xiamen Jihong

0.92

Correlation Coefficient

Shandong Sinoglory  Xiamen Jihong

Almost no diversification

The 3 months correlation between Shandong and Xiamen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sinoglory Health and Xiamen Jihong Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Jihong Package and Shandong Sinoglory 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 Shandong Sinoglory Health are associated (or correlated) with Xiamen Jihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Jihong Package has no effect on the direction of Shandong Sinoglory i.e., Shandong Sinoglory and Xiamen Jihong go up and down completely randomly.

Pair Corralation between Shandong Sinoglory and Xiamen Jihong

Assuming the 90 days trading horizon Shandong Sinoglory Health is expected to under-perform the Xiamen Jihong. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sinoglory Health is 1.85 times less risky than Xiamen Jihong. The stock trades about -0.14 of its potential returns per unit of risk. The Xiamen Jihong Package is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,464  in Xiamen Jihong Package on September 27, 2024 and sell it today you would lose (104.00) from holding Xiamen Jihong Package or give up 7.1% of portfolio value over 90 days.

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

Shandong Sinoglory Health  vs.  Xiamen Jihong Package

Shandong Sinoglory Health

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Sinoglory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiamen Jihong Package

Risk-Adjusted Performance

5 of 100

OK

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

Pair Trading with Shandong Sinoglory and Xiamen Jihong

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

The idea behind Shandong Sinoglory Health and Xiamen Jihong Package 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.