Correlation Between Jiaozuo Wanfang and Guangzhou Jointas

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

By analyzing existing cross correlation between Jiaozuo Wanfang Aluminum and Guangzhou Jointas Chemical, you can compare the effects of market volatilities on Jiaozuo Wanfang and Guangzhou Jointas 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 Jiaozuo Wanfang with a short position of Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiaozuo Wanfang and Guangzhou Jointas.

Diversification Opportunities for Jiaozuo Wanfang and Guangzhou Jointas

0.36

Correlation Coefficient

Jiaozuo Wanfang  Guangzhou Jointas

Weak diversification

The 3 months correlation between Jiaozuo and Guangzhou is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Jiaozuo Wanfang Aluminum and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas and Jiaozuo Wanfang 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 Jiaozuo Wanfang Aluminum are associated (or correlated) with Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of Jiaozuo Wanfang i.e., Jiaozuo Wanfang and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between Jiaozuo Wanfang and Guangzhou Jointas

Assuming the 90 days trading horizon Jiaozuo Wanfang Aluminum is expected to generate 1.02 times more return on investment than Guangzhou Jointas. However, Jiaozuo Wanfang is 1.02 times more volatile than Guangzhou Jointas Chemical. It trades about 0.03 of its potential returns per unit of risk. Guangzhou Jointas Chemical is currently generating about -0.04 per unit of risk. If you would invest  521.00  in Jiaozuo Wanfang Aluminum on September 29, 2024 and sell it today you would earn a total of  131.00  from holding Jiaozuo Wanfang Aluminum or generate 25.14% return on investment over 90 days.

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

Jiaozuo Wanfang Aluminum  vs.  Guangzhou Jointas Chemical

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiaozuo Wanfang Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiaozuo Wanfang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Jointas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jiaozuo Wanfang and Guangzhou Jointas

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

The idea behind Jiaozuo Wanfang Aluminum and Guangzhou Jointas Chemical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.