Correlation Between Jinhui Liquor and Jiangsu Xinning

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

Diversification Opportunities for Jinhui Liquor and Jiangsu Xinning

0.43

Correlation Coefficient

Jinhui Liquor  Jiangsu Xinning

Very weak diversification

The 3 months correlation between Jinhui and Jiangsu is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern 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 Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Jiangsu Xinning

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Jiangsu Xinning. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.6 times less risky than Jiangsu Xinning. The stock trades about -0.14 of its potential returns per unit of risk. The Jiangsu Xinning Modern is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Jiangsu Xinning Modern on October 7, 2024 and sell it today you would lose (53.00) from holding Jiangsu Xinning Modern or give up 14.93% of portfolio value over 90 days.

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

Jinhui Liquor Co  vs.  Jiangsu Xinning Modern

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangsu Xinning Modern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinning Modern are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinning may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jinhui Liquor and Jiangsu Xinning

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

The idea behind Jinhui Liquor Co and Jiangsu Xinning Modern 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.