Correlation Between Jilin OLED and Xiangtan Electrochemical

Can any of the company-specific risk be diversified away by investing in both Jilin OLED and Xiangtan Electrochemical 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 Jilin OLED and Xiangtan Electrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jilin OLED Material and Xiangtan Electrochemical Scientific, you can compare the effects of market volatilities on Jilin OLED and Xiangtan Electrochemical 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 Jilin OLED with a short position of Xiangtan Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin OLED and Xiangtan Electrochemical.

Diversification Opportunities for Jilin OLED and Xiangtan Electrochemical

0.62

Correlation Coefficient

Jilin OLED  Xiangtan Electrochemical

Poor diversification

The 3 months correlation between Jilin and Xiangtan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jilin OLED Material and Xiangtan Electrochemical Scien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangtan Electrochemical and Jilin OLED 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 Jilin OLED Material are associated (or correlated) with Xiangtan Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangtan Electrochemical has no effect on the direction of Jilin OLED i.e., Jilin OLED and Xiangtan Electrochemical go up and down completely randomly.

Pair Corralation between Jilin OLED and Xiangtan Electrochemical

Assuming the 90 days trading horizon Jilin OLED Material is expected to generate 1.75 times more return on investment than Xiangtan Electrochemical. However, Jilin OLED is 1.75 times more volatile than Xiangtan Electrochemical Scientific. It trades about 0.06 of its potential returns per unit of risk. Xiangtan Electrochemical Scientific is currently generating about 0.04 per unit of risk. If you would invest  1,811  in Jilin OLED Material on October 11, 2024 and sell it today you would earn a total of  237.00  from holding Jilin OLED Material or generate 13.09% return on investment over 90 days.

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

Jilin OLED Material  vs.  Xiangtan Electrochemical Scien

Jilin OLED Material

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin OLED Material are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin OLED sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangtan Electrochemical

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangtan Electrochemical Scientific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangtan Electrochemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jilin OLED and Xiangtan Electrochemical

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

The idea behind Jilin OLED Material and Xiangtan Electrochemical Scientific 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.