Correlation Between Jason Furniture and China Building

Can any of the company-specific risk be diversified away by investing in both Jason Furniture and China Building 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 Building 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 Building Material, you can compare the effects of market volatilities on Jason Furniture and China Building 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 Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jason Furniture and China Building.

Diversification Opportunities for Jason Furniture and China Building

-0.09

Correlation Coefficient

Jason Furniture  China Building

Good diversification

The 3 months correlation between Jason and China is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Jason Furniture and China Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Building Material 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 Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Building Material has no effect on the direction of Jason Furniture i.e., Jason Furniture and China Building go up and down completely randomly.

Pair Corralation between Jason Furniture and China Building

Assuming the 90 days trading horizon Jason Furniture is expected to under-perform the China Building. In addition to that, Jason Furniture is 1.04 times more volatile than China Building Material. It trades about -0.03 of its total potential returns per unit of risk. China Building Material is currently generating about -0.03 per unit of volatility. If you would invest  1,126  in China Building Material on October 4, 2024 and sell it today you would lose (395.00) from holding China Building Material or give up 35.08% of portfolio value over 90 days.

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

Jason Furniture  vs.  China Building Material

Jason Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jason Furniture 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.

China Building Material

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Jason Furniture and China Building

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

The idea behind Jason Furniture and China Building Material 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.