Correlation Between Shanghai Rongtai and Jonjee Hi

Can any of the company-specific risk be diversified away by investing in both Shanghai Rongtai and Jonjee Hi 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 Shanghai Rongtai and Jonjee Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Rongtai Health and Jonjee Hi tech Industrial, you can compare the effects of market volatilities on Shanghai Rongtai and Jonjee Hi 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 Shanghai Rongtai with a short position of Jonjee Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Rongtai and Jonjee Hi.

Diversification Opportunities for Shanghai Rongtai and Jonjee Hi

0.9

Correlation Coefficient

Shanghai Rongtai  Jonjee Hi

Almost no diversification

The 3 months correlation between Shanghai and Jonjee is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Rongtai Health and Jonjee Hi tech Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonjee Hi tech and Shanghai Rongtai 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 Shanghai Rongtai Health are associated (or correlated) with Jonjee Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonjee Hi tech has no effect on the direction of Shanghai Rongtai i.e., Shanghai Rongtai and Jonjee Hi go up and down completely randomly.

Pair Corralation between Shanghai Rongtai and Jonjee Hi

Assuming the 90 days trading horizon Shanghai Rongtai Health is expected to generate 0.8 times more return on investment than Jonjee Hi. However, Shanghai Rongtai Health is 1.24 times less risky than Jonjee Hi. It trades about 0.01 of its potential returns per unit of risk. Jonjee Hi tech Industrial is currently generating about 0.01 per unit of risk. If you would invest  1,535  in Shanghai Rongtai Health on September 22, 2024 and sell it today you would earn a total of  5.00  from holding Shanghai Rongtai Health or generate 0.33% return on investment over 90 days.

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

Shanghai Rongtai Health  vs.  Jonjee Hi tech Industrial

Shanghai Rongtai Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Rongtai Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Rongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Jonjee Hi tech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jonjee Hi tech Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jonjee Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Rongtai and Jonjee Hi

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

The idea behind Shanghai Rongtai Health and Jonjee Hi tech Industrial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.