Correlation Between Ningxia Younglight and Jilin Jlu

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

By analyzing existing cross correlation between Ningxia Younglight Chemicals and Jilin Jlu Communication, you can compare the effects of market volatilities on Ningxia Younglight and Jilin Jlu 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 Ningxia Younglight with a short position of Jilin Jlu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Younglight and Jilin Jlu.

Diversification Opportunities for Ningxia Younglight and Jilin Jlu

0.74

Correlation Coefficient

Ningxia Younglight  Jilin Jlu

Poor diversification

The 3 months correlation between Ningxia and Jilin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu Communication and Ningxia Younglight 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 Ningxia Younglight Chemicals are associated (or correlated) with Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Jilin Jlu go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Jilin Jlu

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to generate 0.95 times more return on investment than Jilin Jlu. However, Ningxia Younglight Chemicals is 1.06 times less risky than Jilin Jlu. It trades about 0.19 of its potential returns per unit of risk. Jilin Jlu Communication is currently generating about 0.13 per unit of risk. If you would invest  593.00  in Ningxia Younglight Chemicals on September 23, 2024 and sell it today you would earn a total of  294.00  from holding Ningxia Younglight Chemicals or generate 49.58% return on investment over 90 days.

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

Ningxia Younglight Chemicals  vs.  Jilin Jlu Communication

Ningxia Younglight

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Younglight Chemicals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Younglight sustained solid returns over the last few months and may actually be approaching a breakup point.

Jilin Jlu Communication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Jlu Communication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Jlu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningxia Younglight and Jilin Jlu

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

The idea behind Ningxia Younglight Chemicals and Jilin Jlu Communication 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.