Correlation Between Guangdong Jingyi and King Strong

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

By analyzing existing cross correlation between Guangdong Jingyi Metal and King Strong New Material, you can compare the effects of market volatilities on Guangdong Jingyi and King Strong 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 Guangdong Jingyi with a short position of King Strong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and King Strong.

Diversification Opportunities for Guangdong Jingyi and King Strong

0.94

Correlation Coefficient

Guangdong Jingyi  King Strong

Almost no diversification

The 3 months correlation between Guangdong and King is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and King Strong New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Strong New and Guangdong Jingyi 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 Guangdong Jingyi Metal are associated (or correlated) with King Strong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Strong New has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and King Strong go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and King Strong

Assuming the 90 days trading horizon Guangdong Jingyi is expected to generate 1.07 times less return on investment than King Strong. But when comparing it to its historical volatility, Guangdong Jingyi Metal is 1.58 times less risky than King Strong. It trades about 0.3 of its potential returns per unit of risk. King Strong New Material is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,520  in King Strong New Material on September 13, 2024 and sell it today you would earn a total of  893.00  from holding King Strong New Material or generate 58.75% return on investment over 90 days.

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

Guangdong Jingyi Metal  vs.  King Strong New Material

Guangdong Jingyi Metal

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.

King Strong New

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King Strong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Jingyi and King Strong

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

The idea behind Guangdong Jingyi Metal and King Strong New Material 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.