Correlation Between Shanghai Jin and Industrial

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

Diversification Opportunities for Shanghai Jin and Industrial

-0.44

Correlation Coefficient

Shanghai Jin  Industrial

Very good diversification

The 3 months correlation between Shanghai and Industrial is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jin Jiang and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Shanghai Jin i.e., Shanghai Jin and Industrial go up and down completely randomly.

Pair Corralation between Shanghai Jin and Industrial

Assuming the 90 days trading horizon Shanghai Jin Jiang is expected to under-perform the Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Jin Jiang is 1.12 times less risky than Industrial. The stock trades about -0.04 of its potential returns per unit of risk. The Industrial and Commercial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  612.00  in Industrial and Commercial on October 25, 2024 and sell it today you would earn a total of  32.00  from holding Industrial and Commercial or generate 5.23% return on investment over 90 days.

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

Shanghai Jin Jiang  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Jin and Industrial

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

The idea behind Shanghai Jin Jiang and Industrial and Commercial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.