Correlation Between TRON and Jinlong Machinery

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

By analyzing existing cross correlation between TRON and Jinlong Machinery Electronic, you can compare the effects of market volatilities on TRON and Jinlong Machinery 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 TRON with a short position of Jinlong Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and Jinlong Machinery.

Diversification Opportunities for TRON and Jinlong Machinery

0.05

Correlation Coefficient

TRON  Jinlong Machinery

Significant diversification

The 3 months correlation between TRON and Jinlong is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding TRON and Jinlong Machinery Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinlong Machinery and TRON 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 TRON are associated (or correlated) with Jinlong Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinlong Machinery has no effect on the direction of TRON i.e., TRON and Jinlong Machinery go up and down completely randomly.

Pair Corralation between TRON and Jinlong Machinery

Assuming the 90 days trading horizon TRON is expected to generate 1.07 times more return on investment than Jinlong Machinery. However, TRON is 1.07 times more volatile than Jinlong Machinery Electronic. It trades about -0.11 of its potential returns per unit of risk. Jinlong Machinery Electronic is currently generating about -0.3 per unit of risk. If you would invest  28.00  in TRON on October 11, 2024 and sell it today you would lose (3.00) from holding TRON or give up 10.71% of portfolio value over 90 days.

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

TRON  vs.  Jinlong Machinery Electronic

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Jinlong Machinery

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jinlong Machinery Electronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinlong Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRON and Jinlong Machinery

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

The idea behind TRON and Jinlong Machinery Electronic 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.