Correlation Between Jinhui Liquor and Tianjin Silvery

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

Diversification Opportunities for Jinhui Liquor and Tianjin Silvery

0.72

Correlation Coefficient

Jinhui Liquor  Tianjin Silvery

Poor diversification

The 3 months correlation between Jinhui and Tianjin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Tianjin Silvery Dragon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Silvery Dragon 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 Tianjin Silvery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Silvery Dragon has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Tianjin Silvery go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Tianjin Silvery

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Tianjin Silvery. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.23 times less risky than Tianjin Silvery. The stock trades about -0.02 of its potential returns per unit of risk. The Tianjin Silvery Dragon is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Tianjin Silvery Dragon on September 25, 2024 and sell it today you would earn a total of  84.00  from holding Tianjin Silvery Dragon or generate 15.76% 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.  Tianjin Silvery Dragon

Jinhui Liquor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Liquor Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Silvery Dragon

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Silvery Dragon are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Silvery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinhui Liquor and Tianjin Silvery

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

The idea behind Jinhui Liquor Co and Tianjin Silvery Dragon 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.