Correlation Between Chenzhou Jingui and Sinomach Automobile

Can any of the company-specific risk be diversified away by investing in both Chenzhou Jingui and Sinomach Automobile 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 Chenzhou Jingui and Sinomach Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chenzhou Jingui Silver and Sinomach Automobile Co, you can compare the effects of market volatilities on Chenzhou Jingui and Sinomach Automobile 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 Chenzhou Jingui with a short position of Sinomach Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chenzhou Jingui and Sinomach Automobile.

Diversification Opportunities for Chenzhou Jingui and Sinomach Automobile

0.76

Correlation Coefficient

Chenzhou Jingui  Sinomach Automobile

Poor diversification

The 3 months correlation between Chenzhou and Sinomach is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chenzhou Jingui Silver and Sinomach Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach Automobile and Chenzhou Jingui 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 Chenzhou Jingui Silver are associated (or correlated) with Sinomach Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach Automobile has no effect on the direction of Chenzhou Jingui i.e., Chenzhou Jingui and Sinomach Automobile go up and down completely randomly.

Pair Corralation between Chenzhou Jingui and Sinomach Automobile

Assuming the 90 days trading horizon Chenzhou Jingui Silver is expected to generate 0.98 times more return on investment than Sinomach Automobile. However, Chenzhou Jingui Silver is 1.02 times less risky than Sinomach Automobile. It trades about 0.04 of its potential returns per unit of risk. Sinomach Automobile Co is currently generating about -0.03 per unit of risk. If you would invest  285.00  in Chenzhou Jingui Silver on September 30, 2024 and sell it today you would earn a total of  76.00  from holding Chenzhou Jingui Silver or generate 26.67% return on investment over 90 days.

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

Chenzhou Jingui Silver  vs.  Sinomach Automobile Co

Chenzhou Jingui Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chenzhou Jingui Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chenzhou Jingui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sinomach Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinomach Automobile Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinomach Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chenzhou Jingui and Sinomach Automobile

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

The idea behind Chenzhou Jingui Silver and Sinomach Automobile Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.