Correlation Between Aofu Environmental and Jiangsu Pacific

Can any of the company-specific risk be diversified away by investing in both Aofu Environmental and Jiangsu Pacific 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 Aofu Environmental and Jiangsu Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aofu Environmental Technology and Jiangsu Pacific Quartz, you can compare the effects of market volatilities on Aofu Environmental and Jiangsu Pacific 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 Aofu Environmental with a short position of Jiangsu Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aofu Environmental and Jiangsu Pacific.

Diversification Opportunities for Aofu Environmental and Jiangsu Pacific

0.92

Correlation Coefficient

Aofu Environmental  Jiangsu Pacific

Almost no diversification

The 3 months correlation between Aofu and Jiangsu is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Aofu Environmental Technology and Jiangsu Pacific Quartz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Pacific Quartz and Aofu Environmental 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 Aofu Environmental Technology are associated (or correlated) with Jiangsu Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Pacific Quartz has no effect on the direction of Aofu Environmental i.e., Aofu Environmental and Jiangsu Pacific go up and down completely randomly.

Pair Corralation between Aofu Environmental and Jiangsu Pacific

Assuming the 90 days trading horizon Aofu Environmental Technology is expected to generate 0.97 times more return on investment than Jiangsu Pacific. However, Aofu Environmental Technology is 1.03 times less risky than Jiangsu Pacific. It trades about 0.24 of its potential returns per unit of risk. Jiangsu Pacific Quartz is currently generating about 0.14 per unit of risk. If you would invest  760.00  in Aofu Environmental Technology on September 9, 2024 and sell it today you would earn a total of  478.00  from holding Aofu Environmental Technology or generate 62.89% return on investment over 90 days.

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

Aofu Environmental Technology  vs.  Jiangsu Pacific Quartz

Aofu Environmental

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aofu Environmental Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aofu Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Pacific Quartz

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Pacific Quartz are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Pacific sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aofu Environmental and Jiangsu Pacific

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

The idea behind Aofu Environmental Technology and Jiangsu Pacific Quartz 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.