Correlation Between Guangdong Liantai and Jahen Household

Can any of the company-specific risk be diversified away by investing in both Guangdong Liantai and Jahen Household 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 Guangdong Liantai and Jahen Household into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Liantai Environmental and Jahen Household Products, you can compare the effects of market volatilities on Guangdong Liantai and Jahen Household 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 Guangdong Liantai with a short position of Jahen Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Jahen Household.

Diversification Opportunities for Guangdong Liantai and Jahen Household

0.85

Correlation Coefficient

Guangdong Liantai  Jahen Household

Very poor diversification

The 3 months correlation between Guangdong and Jahen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Jahen Household Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahen Household Products and Guangdong Liantai 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 Guangdong Liantai Environmental are associated (or correlated) with Jahen Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahen Household Products has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and Jahen Household go up and down completely randomly.

Pair Corralation between Guangdong Liantai and Jahen Household

Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to under-perform the Jahen Household. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Liantai Environmental is 1.57 times less risky than Jahen Household. The stock trades about -0.01 of its potential returns per unit of risk. The Jahen Household Products is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,433  in Jahen Household Products on December 4, 2024 and sell it today you would earn a total of  146.00  from holding Jahen Household Products or generate 10.19% return on investment over 90 days.

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

Guangdong Liantai Environmenta  vs.  Jahen Household Products

Guangdong Liantai

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Liantai Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jahen Household Products

Risk-Adjusted Performance

Weak

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

Pair Trading with Guangdong Liantai and Jahen Household

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

The idea behind Guangdong Liantai Environmental and Jahen Household Products 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .