Correlation Between HeNan Splendor and Sichuan Jinshi

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

By analyzing existing cross correlation between HeNan Splendor Science and Sichuan Jinshi Technology, you can compare the effects of market volatilities on HeNan Splendor and Sichuan Jinshi 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 HeNan Splendor with a short position of Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeNan Splendor and Sichuan Jinshi.

Diversification Opportunities for HeNan Splendor and Sichuan Jinshi

0.77

Correlation Coefficient

HeNan Splendor  Sichuan Jinshi

Poor diversification

The 3 months correlation between HeNan and Sichuan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HeNan Splendor Science and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and HeNan Splendor 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 HeNan Splendor Science are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of HeNan Splendor i.e., HeNan Splendor and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between HeNan Splendor and Sichuan Jinshi

Assuming the 90 days trading horizon HeNan Splendor is expected to generate 1.11 times less return on investment than Sichuan Jinshi. In addition to that, HeNan Splendor is 1.36 times more volatile than Sichuan Jinshi Technology. It trades about 0.16 of its total potential returns per unit of risk. Sichuan Jinshi Technology is currently generating about 0.24 per unit of volatility. If you would invest  492.00  in Sichuan Jinshi Technology on September 5, 2024 and sell it today you would earn a total of  206.00  from holding Sichuan Jinshi Technology or generate 41.87% return on investment over 90 days.

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

HeNan Splendor Science  vs.  Sichuan Jinshi Technology

HeNan Splendor Science

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeNan Splendor sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Jinshi Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeNan Splendor and Sichuan Jinshi

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

The idea behind HeNan Splendor Science and Sichuan Jinshi Technology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.