Correlation Between Shanghai Yaoji and Jiangsu Xinning

Can any of the company-specific risk be diversified away by investing in both Shanghai Yaoji and Jiangsu Xinning 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 Shanghai Yaoji and Jiangsu Xinning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Yaoji Playing and Jiangsu Xinning Modern, you can compare the effects of market volatilities on Shanghai Yaoji and Jiangsu Xinning 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 Shanghai Yaoji with a short position of Jiangsu Xinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Yaoji and Jiangsu Xinning.

Diversification Opportunities for Shanghai Yaoji and Jiangsu Xinning

0.87

Correlation Coefficient

Shanghai Yaoji  Jiangsu Xinning

Very poor diversification

The 3 months correlation between Shanghai and Jiangsu is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Jiangsu Xinning

Assuming the 90 days trading horizon Shanghai Yaoji is expected to generate 1.81 times less return on investment than Jiangsu Xinning. In addition to that, Shanghai Yaoji is 1.06 times more volatile than Jiangsu Xinning Modern. It trades about 0.11 of its total potential returns per unit of risk. Jiangsu Xinning Modern is currently generating about 0.21 per unit of volatility. If you would invest  236.00  in Jiangsu Xinning Modern on September 26, 2024 and sell it today you would earn a total of  148.00  from holding Jiangsu Xinning Modern or generate 62.71% return on investment over 90 days.

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

Shanghai Yaoji Playing  vs.  Jiangsu Xinning Modern

Shanghai Yaoji Playing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yaoji sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Xinning Modern

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Shanghai Yaoji and Jiangsu Xinning

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

The idea behind Shanghai Yaoji Playing and Jiangsu Xinning Modern 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.