Correlation Between Diamond Estates and Jiangsu Expressway

Can any of the company-specific risk be diversified away by investing in both Diamond Estates and Jiangsu Expressway 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 Diamond Estates and Jiangsu Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Estates Wines and Jiangsu Expressway Co, you can compare the effects of market volatilities on Diamond Estates and Jiangsu Expressway 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 Diamond Estates with a short position of Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and Jiangsu Expressway.

Diversification Opportunities for Diamond Estates and Jiangsu Expressway

0.0

Correlation Coefficient

Diamond Estates  Jiangsu Expressway

Pay attention - limited upside

The 3 months correlation between Diamond and Jiangsu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Diamond Estates i.e., Diamond Estates and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Diamond Estates and Jiangsu Expressway

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Jiangsu Expressway. But the pink sheet apears to be less risky and, when comparing its historical volatility, Diamond Estates Wines is 1.2 times less risky than Jiangsu Expressway. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Jiangsu Expressway Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,996  in Jiangsu Expressway Co on October 22, 2024 and sell it today you would earn a total of  124.00  from holding Jiangsu Expressway Co or generate 6.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Diamond Estates Wines  vs.  Jiangsu Expressway Co

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Diamond Estates is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Jiangsu Expressway

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Diamond Estates and Jiangsu Expressway

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

The idea behind Diamond Estates Wines and Jiangsu Expressway Co 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.