Correlation Between Jiangsu Expressway and Atlas Arteria

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

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

Diversification Opportunities for Jiangsu Expressway and Atlas Arteria

0.02

Correlation Coefficient

Jiangsu Expressway  Atlas Arteria

Significant diversification

The 3 months correlation between Jiangsu and Atlas is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Expressway and Atlas Arteria Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Arteria Limited and Jiangsu Expressway 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 Jiangsu Expressway are associated (or correlated) with Atlas Arteria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Arteria Limited has no effect on the direction of Jiangsu Expressway i.e., Jiangsu Expressway and Atlas Arteria go up and down completely randomly.

Pair Corralation between Jiangsu Expressway and Atlas Arteria

Assuming the 90 days horizon Jiangsu Expressway is expected to under-perform the Atlas Arteria. But the pink sheet apears to be less risky and, when comparing its historical volatility, Jiangsu Expressway is 3.54 times less risky than Atlas Arteria. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Atlas Arteria Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  273.00  in Atlas Arteria Limited on December 20, 2024 and sell it today you would earn a total of  37.00  from holding Atlas Arteria Limited or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.66%
Values	Daily Returns

Jiangsu Expressway  vs.  Atlas Arteria Limited

Jiangsu Expressway

Risk-Adjusted Performance

Very Weak

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

Atlas Arteria Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Arteria Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atlas Arteria reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Expressway and Atlas Arteria

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

The idea behind Jiangsu Expressway and Atlas Arteria Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.