Correlation Between Shanghai Jin and Wankai New

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

Diversification Opportunities for Shanghai Jin and Wankai New

0.66

Correlation Coefficient

Shanghai Jin  Wankai New

Poor diversification

The 3 months correlation between Shanghai and Wankai is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jin Jiang and Wankai New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wankai New Materials 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 Wankai New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wankai New Materials has no effect on the direction of Shanghai Jin i.e., Shanghai Jin and Wankai New go up and down completely randomly.

Pair Corralation between Shanghai Jin and Wankai New

Assuming the 90 days trading horizon Shanghai Jin Jiang is expected to generate 0.65 times more return on investment than Wankai New. However, Shanghai Jin Jiang is 1.54 times less risky than Wankai New. It trades about -0.14 of its potential returns per unit of risk. Wankai New Materials is currently generating about -0.47 per unit of risk. If you would invest  153.00  in Shanghai Jin Jiang on October 10, 2024 and sell it today you would lose (4.00) from holding Shanghai Jin Jiang or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Shanghai Jin Jiang  vs.  Wankai New Materials

Shanghai Jin Jiang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Jin Jiang has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Wankai New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wankai New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shanghai Jin and Wankai New

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

The idea behind Shanghai Jin Jiang and Wankai New 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.