Correlation Between Jiangsu Pacific and Fujian Longzhou

Can any of the company-specific risk be diversified away by investing in both Jiangsu Pacific and Fujian Longzhou 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 Jiangsu Pacific and Fujian Longzhou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Pacific Quartz and Fujian Longzhou Transportation, you can compare the effects of market volatilities on Jiangsu Pacific and Fujian Longzhou 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 Jiangsu Pacific with a short position of Fujian Longzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Pacific and Fujian Longzhou.

Diversification Opportunities for Jiangsu Pacific and Fujian Longzhou

0.75

Correlation Coefficient

Jiangsu Pacific  Fujian Longzhou

Poor diversification

The 3 months correlation between Jiangsu and Fujian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Pacific Quartz and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and Jiangsu Pacific 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 Jiangsu Pacific Quartz are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Jiangsu Pacific i.e., Jiangsu Pacific and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Jiangsu Pacific and Fujian Longzhou

Assuming the 90 days trading horizon Jiangsu Pacific Quartz is expected to generate 0.61 times more return on investment than Fujian Longzhou. However, Jiangsu Pacific Quartz is 1.63 times less risky than Fujian Longzhou. It trades about -0.1 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about -0.08 per unit of risk. If you would invest  2,960  in Jiangsu Pacific Quartz on December 2, 2024 and sell it today you would lose (368.00) from holding Jiangsu Pacific Quartz or give up 12.43% of portfolio value over 90 days.

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

Jiangsu Pacific Quartz  vs.  Fujian Longzhou Transportation

Jiangsu Pacific Quartz

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Pacific Quartz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fujian Longzhou Tran

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fujian Longzhou Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jiangsu Pacific and Fujian Longzhou

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

The idea behind Jiangsu Pacific Quartz and Fujian Longzhou Transportation 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..