Correlation Between Jiangxi JDL and Qijing Machinery

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

Diversification Opportunities for Jiangxi JDL and Qijing Machinery

0.61

Correlation Coefficient

Jiangxi JDL  Qijing Machinery

Poor diversification

The 3 months correlation between Jiangxi and Qijing is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi JDL Environmental and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Jiangxi JDL i.e., Jiangxi JDL and Qijing Machinery go up and down completely randomly.

Pair Corralation between Jiangxi JDL and Qijing Machinery

Assuming the 90 days trading horizon Jiangxi JDL is expected to generate 19.15 times less return on investment than Qijing Machinery. But when comparing it to its historical volatility, Jiangxi JDL Environmental is 4.41 times less risky than Qijing Machinery. It trades about 0.06 of its potential returns per unit of risk. Qijing Machinery is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Qijing Machinery on December 26, 2024 and sell it today you would earn a total of  1,230  from holding Qijing Machinery or generate 97.85% return on investment over 90 days.

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

Jiangxi JDL Environmental  vs.  Qijing Machinery

Jiangxi JDL Environmental

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi JDL Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangxi JDL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qijing Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangxi JDL and Qijing Machinery

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

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