Correlation Between Jinhui Liquor and Chengdu Xingrong

Can any of the company-specific risk be diversified away by investing in both Jinhui Liquor and Chengdu Xingrong 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 Jinhui Liquor and Chengdu Xingrong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhui Liquor Co and Chengdu Xingrong Investment, you can compare the effects of market volatilities on Jinhui Liquor and Chengdu Xingrong 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 Jinhui Liquor with a short position of Chengdu Xingrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhui Liquor and Chengdu Xingrong.

Diversification Opportunities for Jinhui Liquor and Chengdu Xingrong

-0.05

Correlation Coefficient

Jinhui Liquor  Chengdu Xingrong

Good diversification

The 3 months correlation between Jinhui and Chengdu is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Chengdu Xingrong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xingrong Inv and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Chengdu Xingrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xingrong Inv has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Chengdu Xingrong go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Chengdu Xingrong

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Chengdu Xingrong. In addition to that, Jinhui Liquor is 1.24 times more volatile than Chengdu Xingrong Investment. It trades about -0.03 of its total potential returns per unit of risk. Chengdu Xingrong Investment is currently generating about -0.03 per unit of volatility. If you would invest  748.00  in Chengdu Xingrong Investment on October 10, 2024 and sell it today you would lose (34.00) from holding Chengdu Xingrong Investment or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Jinhui Liquor Co  vs.  Chengdu Xingrong Investment

Jinhui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chengdu Xingrong Inv

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jinhui Liquor and Chengdu Xingrong

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

The idea behind Jinhui Liquor Co and Chengdu Xingrong Investment 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 Global Correlations module to find global opportunities by holding instruments from different markets.