Correlation Between Jason Furniture and Shanxi Xishan

Can any of the company-specific risk be diversified away by investing in both Jason Furniture and Shanxi Xishan 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 Jason Furniture and Shanxi Xishan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jason Furniture and Shanxi Xishan Coal, you can compare the effects of market volatilities on Jason Furniture and Shanxi Xishan 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 Jason Furniture with a short position of Shanxi Xishan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jason Furniture and Shanxi Xishan.

Diversification Opportunities for Jason Furniture and Shanxi Xishan

0.29

Correlation Coefficient

Jason Furniture  Shanxi Xishan

Modest diversification

The 3 months correlation between Jason and Shanxi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Jason Furniture and Shanxi Xishan Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanxi Xishan Coal and Jason Furniture 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 Jason Furniture are associated (or correlated) with Shanxi Xishan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanxi Xishan Coal has no effect on the direction of Jason Furniture i.e., Jason Furniture and Shanxi Xishan go up and down completely randomly.

Pair Corralation between Jason Furniture and Shanxi Xishan

Assuming the 90 days trading horizon Jason Furniture is expected to generate 1.77 times more return on investment than Shanxi Xishan. However, Jason Furniture is 1.77 times more volatile than Shanxi Xishan Coal. It trades about -0.02 of its potential returns per unit of risk. Shanxi Xishan Coal is currently generating about -0.22 per unit of risk. If you would invest  2,795  in Jason Furniture on December 25, 2024 and sell it today you would lose (95.00) from holding Jason Furniture or give up 3.4% of portfolio value over 90 days.

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

Jason Furniture  vs.  Shanxi Xishan Coal

Jason Furniture

Risk-Adjusted Performance

Very Weak

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

Shanxi Xishan Coal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanxi Xishan Coal 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 Jason Furniture and Shanxi Xishan

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

The idea behind Jason Furniture and Shanxi Xishan Coal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.