Correlation Between Jinhui Liquor and Panda Financial

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

Diversification Opportunities for Jinhui Liquor and Panda Financial

0.49

Correlation Coefficient

Jinhui Liquor  Panda Financial

Very weak diversification

The 3 months correlation between Jinhui and Panda is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Panda Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Financial Holding 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 Panda Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Financial Holding has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Panda Financial go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Panda Financial

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Panda Financial. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.61 times less risky than Panda Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Panda Financial Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,194  in Panda Financial Holding on October 26, 2024 and sell it today you would lose (28.00) from holding Panda Financial Holding or give up 2.35% 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.  Panda Financial Holding

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.

Panda Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Panda Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Panda Financial 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 Panda Financial

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

The idea behind Jinhui Liquor Co and Panda Financial Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.