Correlation Between APT Medical and Jilin Chemical

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

By analyzing existing cross correlation between APT Medical and Jilin Chemical Fibre, you can compare the effects of market volatilities on APT Medical and Jilin Chemical 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 APT Medical with a short position of Jilin Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of APT Medical and Jilin Chemical.

Diversification Opportunities for APT Medical and Jilin Chemical

-0.28

Correlation Coefficient

APT Medical  Jilin Chemical

Very good diversification

The 3 months correlation between APT and Jilin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding APT Medical and Jilin Chemical Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Chemical Fibre and APT Medical 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 APT Medical are associated (or correlated) with Jilin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Chemical Fibre has no effect on the direction of APT Medical i.e., APT Medical and Jilin Chemical go up and down completely randomly.

Pair Corralation between APT Medical and Jilin Chemical

Assuming the 90 days trading horizon APT Medical is expected to generate 0.62 times more return on investment than Jilin Chemical. However, APT Medical is 1.6 times less risky than Jilin Chemical. It trades about -0.14 of its potential returns per unit of risk. Jilin Chemical Fibre is currently generating about -0.18 per unit of risk. If you would invest  37,252  in APT Medical on October 9, 2024 and sell it today you would lose (2,385) from holding APT Medical or give up 6.4% of portfolio value over 90 days.

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

APT Medical  vs.  Jilin Chemical Fibre

APT Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APT Medical 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.

Jilin Chemical Fibre

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with APT Medical and Jilin Chemical

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

The idea behind APT Medical and Jilin Chemical Fibre 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.