Correlation Between Chahua Modern and Jiangxi Ganfeng

Can any of the company-specific risk be diversified away by investing in both Chahua Modern and Jiangxi Ganfeng 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 Chahua Modern and Jiangxi Ganfeng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chahua Modern Housewares and Jiangxi Ganfeng Lithium, you can compare the effects of market volatilities on Chahua Modern and Jiangxi Ganfeng 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 Chahua Modern with a short position of Jiangxi Ganfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chahua Modern and Jiangxi Ganfeng.

Diversification Opportunities for Chahua Modern and Jiangxi Ganfeng

0.41

Correlation Coefficient

Chahua Modern  Jiangxi Ganfeng

Very weak diversification

The 3 months correlation between Chahua and Jiangxi is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and Jiangxi Ganfeng Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Ganfeng Lithium and Chahua Modern 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 Chahua Modern Housewares are associated (or correlated) with Jiangxi Ganfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Ganfeng Lithium has no effect on the direction of Chahua Modern i.e., Chahua Modern and Jiangxi Ganfeng go up and down completely randomly.

Pair Corralation between Chahua Modern and Jiangxi Ganfeng

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to generate 1.4 times more return on investment than Jiangxi Ganfeng. However, Chahua Modern is 1.4 times more volatile than Jiangxi Ganfeng Lithium. It trades about 0.06 of its potential returns per unit of risk. Jiangxi Ganfeng Lithium is currently generating about -0.02 per unit of risk. If you would invest  2,321  in Chahua Modern Housewares on December 26, 2024 and sell it today you would earn a total of  166.00  from holding Chahua Modern Housewares or generate 7.15% return on investment over 90 days.

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

Chahua Modern Housewares  vs.  Jiangxi Ganfeng Lithium

Chahua Modern Housewares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jiangxi Ganfeng Lithium

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chahua Modern and Jiangxi Ganfeng

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

The idea behind Chahua Modern Housewares and Jiangxi Ganfeng Lithium 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.