Correlation Between AUPU Home and Jizhong Energy

Can any of the company-specific risk be diversified away by investing in both AUPU Home and Jizhong Energy 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 AUPU Home and Jizhong Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUPU Home Style and Jizhong Energy Resources, you can compare the effects of market volatilities on AUPU Home and Jizhong Energy 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 AUPU Home with a short position of Jizhong Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUPU Home and Jizhong Energy.

Diversification Opportunities for AUPU Home and Jizhong Energy

0.7

Correlation Coefficient

AUPU Home  Jizhong Energy

Poor diversification

The 3 months correlation between AUPU and Jizhong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AUPU Home Style and Jizhong Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jizhong Energy Resources and AUPU Home 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 AUPU Home Style are associated (or correlated) with Jizhong Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jizhong Energy Resources has no effect on the direction of AUPU Home i.e., AUPU Home and Jizhong Energy go up and down completely randomly.

Pair Corralation between AUPU Home and Jizhong Energy

Assuming the 90 days trading horizon AUPU Home Style is expected to generate 1.2 times more return on investment than Jizhong Energy. However, AUPU Home is 1.2 times more volatile than Jizhong Energy Resources. It trades about 0.03 of its potential returns per unit of risk. Jizhong Energy Resources is currently generating about -0.02 per unit of risk. If you would invest  977.00  in AUPU Home Style on October 24, 2024 and sell it today you would earn a total of  118.00  from holding AUPU Home Style or generate 12.08% return on investment over 90 days.

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

AUPU Home Style  vs.  Jizhong Energy Resources

AUPU Home Style

Risk-Adjusted Performance

1 of 100

Weak

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

Jizhong Energy Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jizhong Energy Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jizhong Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AUPU Home and Jizhong Energy

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

The idea behind AUPU Home Style and Jizhong Energy Resources 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.