Correlation Between Shanghai Jin and Yunnan Chuangxin

Can any of the company-specific risk be diversified away by investing in both Shanghai Jin and Yunnan Chuangxin 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 Shanghai Jin and Yunnan Chuangxin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Jin Jiang and Yunnan Chuangxin New, you can compare the effects of market volatilities on Shanghai Jin and Yunnan Chuangxin 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 Shanghai Jin with a short position of Yunnan Chuangxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Jin and Yunnan Chuangxin.

Diversification Opportunities for Shanghai Jin and Yunnan Chuangxin

0.73

Correlation Coefficient

Shanghai Jin  Yunnan Chuangxin

Poor diversification

The 3 months correlation between Shanghai and Yunnan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jin Jiang and Yunnan Chuangxin New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chuangxin New and Shanghai Jin 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 Shanghai Jin Jiang are associated (or correlated) with Yunnan Chuangxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chuangxin New has no effect on the direction of Shanghai Jin i.e., Shanghai Jin and Yunnan Chuangxin go up and down completely randomly.

Pair Corralation between Shanghai Jin and Yunnan Chuangxin

Assuming the 90 days trading horizon Shanghai Jin Jiang is expected to generate 0.43 times more return on investment than Yunnan Chuangxin. However, Shanghai Jin Jiang is 2.31 times less risky than Yunnan Chuangxin. It trades about -0.03 of its potential returns per unit of risk. Yunnan Chuangxin New is currently generating about -0.41 per unit of risk. If you would invest  150.00  in Shanghai Jin Jiang on September 26, 2024 and sell it today you would lose (1.00) from holding Shanghai Jin Jiang or give up 0.67% of portfolio value over 90 days.

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

Shanghai Jin Jiang  vs.  Yunnan Chuangxin New

Shanghai Jin Jiang

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jin Jiang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Jin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yunnan Chuangxin New

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Chuangxin New are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Chuangxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Jin and Yunnan Chuangxin

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

The idea behind Shanghai Jin Jiang and Yunnan Chuangxin New 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.