Correlation Between Jilin OLED and XiAn Dagang

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

Diversification Opportunities for Jilin OLED and XiAn Dagang

0.54

Correlation Coefficient

Jilin OLED  XiAn Dagang

Very weak diversification

The 3 months correlation between Jilin and XiAn is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jilin OLED Material and XiAn Dagang Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XiAn Dagang Road 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 XiAn Dagang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XiAn Dagang Road has no effect on the direction of Jilin OLED i.e., Jilin OLED and XiAn Dagang go up and down completely randomly.

Pair Corralation between Jilin OLED and XiAn Dagang

Assuming the 90 days trading horizon Jilin OLED Material is expected to under-perform the XiAn Dagang. But the stock apears to be less risky and, when comparing its historical volatility, Jilin OLED Material is 1.17 times less risky than XiAn Dagang. The stock trades about 0.0 of its potential returns per unit of risk. The XiAn Dagang Road is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  637.00  in XiAn Dagang Road on December 25, 2024 and sell it today you would lose (5.00) from holding XiAn Dagang Road or give up 0.78% of portfolio value over 90 days.

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

Jilin OLED Material  vs.  XiAn Dagang Road

Jilin OLED Material

Risk-Adjusted Performance

Very Weak

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

XiAn Dagang Road

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XiAn Dagang Road are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XiAn Dagang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jilin OLED and XiAn Dagang

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

The idea behind Jilin OLED Material and XiAn Dagang Road 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 Stocks Directory module to find actively traded stocks across global markets.