Correlation Between Jinhui Liquor and Zhejiang Kingland

Can any of the company-specific risk be diversified away by investing in both Jinhui Liquor and Zhejiang Kingland 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 Zhejiang Kingland 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 Zhejiang Kingland Pipeline, you can compare the effects of market volatilities on Jinhui Liquor and Zhejiang Kingland 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 Zhejiang Kingland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhui Liquor and Zhejiang Kingland.

Diversification Opportunities for Jinhui Liquor and Zhejiang Kingland

0.54

Correlation Coefficient

Jinhui Liquor  Zhejiang Kingland

Very weak diversification

The 3 months correlation between Jinhui and Zhejiang is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Zhejiang Kingland Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Kingland 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 Zhejiang Kingland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Kingland has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Zhejiang Kingland go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Zhejiang Kingland

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Zhejiang Kingland. In addition to that, Jinhui Liquor is 1.42 times more volatile than Zhejiang Kingland Pipeline. It trades about -0.07 of its total potential returns per unit of risk. Zhejiang Kingland Pipeline is currently generating about 0.12 per unit of volatility. If you would invest  591.00  in Zhejiang Kingland Pipeline on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Zhejiang Kingland Pipeline or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Jinhui Liquor Co  vs.  Zhejiang Kingland Pipeline

Jinhui Liquor

Risk-Adjusted Performance

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.

Zhejiang Kingland

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Kingland Pipeline are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Kingland may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Jinhui Liquor and Zhejiang Kingland

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

The idea behind Jinhui Liquor Co and Zhejiang Kingland Pipeline 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.