Correlation Between Jiangxi JDL and Ningbo Ligong

Can any of the company-specific risk be diversified away by investing in both Jiangxi JDL and Ningbo Ligong 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 Jiangxi JDL and Ningbo Ligong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangxi JDL Environmental and Ningbo Ligong Online, you can compare the effects of market volatilities on Jiangxi JDL and Ningbo Ligong 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 Jiangxi JDL with a short position of Ningbo Ligong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi JDL and Ningbo Ligong.

Diversification Opportunities for Jiangxi JDL and Ningbo Ligong

-0.15

Correlation Coefficient

Jiangxi JDL  Ningbo Ligong

Good diversification

The 3 months correlation between Jiangxi and Ningbo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi JDL Environmental and Ningbo Ligong Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Ligong Online and Jiangxi JDL 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 Jiangxi JDL Environmental are associated (or correlated) with Ningbo Ligong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Ligong Online has no effect on the direction of Jiangxi JDL i.e., Jiangxi JDL and Ningbo Ligong go up and down completely randomly.

Pair Corralation between Jiangxi JDL and Ningbo Ligong

Assuming the 90 days trading horizon Jiangxi JDL Environmental is expected to generate 0.96 times more return on investment than Ningbo Ligong. However, Jiangxi JDL Environmental is 1.04 times less risky than Ningbo Ligong. It trades about 0.18 of its potential returns per unit of risk. Ningbo Ligong Online is currently generating about -0.01 per unit of risk. If you would invest  940.00  in Jiangxi JDL Environmental on September 12, 2024 and sell it today you would earn a total of  290.00  from holding Jiangxi JDL Environmental or generate 30.85% return on investment over 90 days.

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

Jiangxi JDL Environmental  vs.  Ningbo Ligong Online

Jiangxi JDL Environmental

Risk-Adjusted Performance

14 of 100

Good

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

Ningbo Ligong Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Ligong Online has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningbo Ligong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangxi JDL and Ningbo Ligong

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

The idea behind Jiangxi JDL Environmental and Ningbo Ligong Online 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.