Correlation Between Jiangsu Pacific and Beijing HuaYuanYiTong

Can any of the company-specific risk be diversified away by investing in both Jiangsu Pacific and Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong Thermal, you can compare the effects of market volatilities on Jiangsu Pacific and Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Pacific and Beijing HuaYuanYiTong.

Diversification Opportunities for Jiangsu Pacific and Beijing HuaYuanYiTong

0.34

Correlation Coefficient

Jiangsu Pacific  Beijing HuaYuanYiTong

Weak diversification

The 3 months correlation between Jiangsu and Beijing is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Pacific Quartz and Beijing HuaYuanYiTong Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing HuaYuanYiTong has no effect on the direction of Jiangsu Pacific i.e., Jiangsu Pacific and Beijing HuaYuanYiTong go up and down completely randomly.

Pair Corralation between Jiangsu Pacific and Beijing HuaYuanYiTong

Assuming the 90 days trading horizon Jiangsu Pacific Quartz is expected to under-perform the Beijing HuaYuanYiTong. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Pacific Quartz is 1.24 times less risky than Beijing HuaYuanYiTong. The stock trades about -0.14 of its potential returns per unit of risk. The Beijing HuaYuanYiTong Thermal is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,075  in Beijing HuaYuanYiTong Thermal on October 7, 2024 and sell it today you would lose (126.00) from holding Beijing HuaYuanYiTong Thermal or give up 11.72% of portfolio value over 90 days.

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

Jiangsu Pacific Quartz  vs.  Beijing HuaYuanYiTong Thermal

Jiangsu Pacific Quartz

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing HuaYuanYiTong

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jiangsu Pacific and Beijing HuaYuanYiTong

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

The idea behind Jiangsu Pacific Quartz and Beijing HuaYuanYiTong Thermal 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.