Correlation Between Jinhui Liquor and Nanjing Putian

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

Diversification Opportunities for Jinhui Liquor and Nanjing Putian

0.63

Correlation Coefficient

Jinhui Liquor  Nanjing Putian

Poor diversification

The 3 months correlation between Jinhui and Nanjing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Nanjing Putian Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Putian Telec 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 Nanjing Putian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Putian Telec has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Nanjing Putian go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Nanjing Putian

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Nanjing Putian. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.87 times less risky than Nanjing Putian. The stock trades about -0.04 of its potential returns per unit of risk. The Nanjing Putian Telecommunications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  366.00  in Nanjing Putian Telecommunications on October 25, 2024 and sell it today you would earn a total of  23.00  from holding Nanjing Putian Telecommunications or generate 6.28% return on investment over 90 days.

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

Jinhui Liquor Co  vs.  Nanjing Putian Telecommunicati

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 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.

Nanjing Putian Telec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jinhui Liquor and Nanjing Putian

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

The idea behind Jinhui Liquor Co and Nanjing Putian Telecommunications 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.