Correlation Between Jilin OLED and Ningxia Building

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

Diversification Opportunities for Jilin OLED and Ningxia Building

0.24

Correlation Coefficient

Jilin OLED  Ningxia Building

Modest diversification

The 3 months correlation between Jilin and Ningxia is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Jilin OLED Material and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat 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 Ningxia Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Jilin OLED i.e., Jilin OLED and Ningxia Building go up and down completely randomly.

Pair Corralation between Jilin OLED and Ningxia Building

Assuming the 90 days trading horizon Jilin OLED Material is expected to under-perform the Ningxia Building. In addition to that, Jilin OLED is 1.09 times more volatile than Ningxia Building Materials. It trades about 0.0 of its total potential returns per unit of risk. Ningxia Building Materials is currently generating about 0.05 per unit of volatility. If you would invest  1,489  in Ningxia Building Materials on December 24, 2024 and sell it today you would earn a total of  98.00  from holding Ningxia Building Materials or generate 6.58% return on investment over 90 days.

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

Jilin OLED Material  vs.  Ningxia Building Materials

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.

Ningxia Building Mat

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Jilin OLED and Ningxia Building

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

The idea behind Jilin OLED Material and Ningxia Building Materials 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.