Correlation Between Zhejiang JIULI and Wanhua Chemical

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

By analyzing existing cross correlation between Zhejiang JIULI Hi tech and Wanhua Chemical Group, you can compare the effects of market volatilities on Zhejiang JIULI and Wanhua Chemical 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 Zhejiang JIULI with a short position of Wanhua Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang JIULI and Wanhua Chemical.

Diversification Opportunities for Zhejiang JIULI and Wanhua Chemical

0.47

Correlation Coefficient

Zhejiang JIULI  Wanhua Chemical

Very weak diversification

The 3 months correlation between Zhejiang and Wanhua is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang JIULI Hi tech and Wanhua Chemical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wanhua Chemical Group and Zhejiang JIULI 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 Zhejiang JIULI Hi tech are associated (or correlated) with Wanhua Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wanhua Chemical Group has no effect on the direction of Zhejiang JIULI i.e., Zhejiang JIULI and Wanhua Chemical go up and down completely randomly.

Pair Corralation between Zhejiang JIULI and Wanhua Chemical

Assuming the 90 days trading horizon Zhejiang JIULI Hi tech is expected to generate 1.0 times more return on investment than Wanhua Chemical. However, Zhejiang JIULI is 1.0 times more volatile than Wanhua Chemical Group. It trades about 0.2 of its potential returns per unit of risk. Wanhua Chemical Group is currently generating about 0.05 per unit of risk. If you would invest  1,873  in Zhejiang JIULI Hi tech on September 2, 2024 and sell it today you would earn a total of  583.00  from holding Zhejiang JIULI Hi tech or generate 31.13% return on investment over 90 days.

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

Zhejiang JIULI Hi tech  vs.  Wanhua Chemical Group

Zhejiang JIULI Hi

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang JIULI sustained solid returns over the last few months and may actually be approaching a breakup point.

Wanhua Chemical Group

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Zhejiang JIULI and Wanhua Chemical

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

The idea behind Zhejiang JIULI Hi tech and Wanhua Chemical Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.