Correlation Between Jason Furniture and China Longyuan

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

By analyzing existing cross correlation between Jason Furniture and China Longyuan Power, you can compare the effects of market volatilities on Jason Furniture and China Longyuan 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 China Longyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jason Furniture and China Longyuan.

Diversification Opportunities for Jason Furniture and China Longyuan

0.83

Correlation Coefficient

Jason Furniture  China Longyuan

Very poor diversification

The 3 months correlation between Jason and China is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Jason Furniture and China Longyuan Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Longyuan Power 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 China Longyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Longyuan Power has no effect on the direction of Jason Furniture i.e., Jason Furniture and China Longyuan go up and down completely randomly.

Pair Corralation between Jason Furniture and China Longyuan

Assuming the 90 days trading horizon Jason Furniture is expected to generate 2.06 times more return on investment than China Longyuan. However, Jason Furniture is 2.06 times more volatile than China Longyuan Power. It trades about 0.02 of its potential returns per unit of risk. China Longyuan Power is currently generating about -0.1 per unit of risk. If you would invest  2,882  in Jason Furniture on September 19, 2024 and sell it today you would earn a total of  7.00  from holding Jason Furniture or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Jason Furniture  vs.  China Longyuan Power

Jason Furniture

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jason Furniture are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jason Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

China Longyuan Power

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Longyuan Power are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Longyuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jason Furniture and China Longyuan

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

The idea behind Jason Furniture and China Longyuan Power 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.