Correlation Between GreenTech Environmental and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both GreenTech Environmental and Jiangyin Jianghua 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 GreenTech Environmental and Jiangyin Jianghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GreenTech Environmental Co and Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on GreenTech Environmental and Jiangyin Jianghua 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 GreenTech Environmental with a short position of Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of GreenTech Environmental and Jiangyin Jianghua.

Diversification Opportunities for GreenTech Environmental and Jiangyin Jianghua

0.64

Correlation Coefficient

GreenTech Environmental  Jiangyin Jianghua

Poor diversification

The 3 months correlation between GreenTech and Jiangyin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GreenTech Environmental Co and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua and GreenTech Environmental 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 GreenTech Environmental Co are associated (or correlated) with Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of GreenTech Environmental i.e., GreenTech Environmental and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between GreenTech Environmental and Jiangyin Jianghua

Assuming the 90 days trading horizon GreenTech Environmental Co is expected to generate 1.52 times more return on investment than Jiangyin Jianghua. However, GreenTech Environmental is 1.52 times more volatile than Jiangyin Jianghua Microelectronics. It trades about 0.17 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about 0.09 per unit of risk. If you would invest  1,397  in GreenTech Environmental Co on December 2, 2024 and sell it today you would earn a total of  183.00  from holding GreenTech Environmental Co or generate 13.1% return on investment over 90 days.

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

GreenTech Environmental Co  vs.  Jiangyin Jianghua Microelectro

GreenTech Environmental

Risk-Adjusted Performance

Very Weak

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

Jiangyin Jianghua

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangyin Jianghua Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GreenTech Environmental and Jiangyin Jianghua

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

The idea behind GreenTech Environmental Co and Jiangyin Jianghua Microelectronics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.