Correlation Between Guangdong Ellington and Jiangyin Jianghua

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

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

Diversification Opportunities for Guangdong Ellington and Jiangyin Jianghua

0.12

Correlation Coefficient

Guangdong Ellington  Jiangyin Jianghua

Average diversification

The 3 months correlation between Guangdong and Jiangyin is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Ellington Electronic and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and Guangdong Ellington 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 Guangdong Ellington Electronics are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Guangdong Ellington i.e., Guangdong Ellington and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Guangdong Ellington and Jiangyin Jianghua

Assuming the 90 days trading horizon Guangdong Ellington Electronics is expected to generate 1.24 times more return on investment than Jiangyin Jianghua. However, Guangdong Ellington is 1.24 times more volatile than Jiangyin Jianghua Microelectronics. It trades about -0.05 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about -0.3 per unit of risk. If you would invest  932.00  in Guangdong Ellington Electronics on October 8, 2024 and sell it today you would lose (45.00) from holding Guangdong Ellington Electronics or give up 4.83% of portfolio value over 90 days.

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

Guangdong Ellington Electronic  vs.  Jiangyin Jianghua Microelectro

Guangdong Ellington

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Ellington Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jiangyin Jianghua

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangyin Jianghua Microelectronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangyin Jianghua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Ellington and Jiangyin Jianghua

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

The idea behind Guangdong Ellington Electronics and Jiangyin Jianghua Microelectronics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.