Correlation Between Sichuan Jinshi and Road Environment

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

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

Diversification Opportunities for Sichuan Jinshi and Road Environment

0.83

Correlation Coefficient

Sichuan Jinshi  Road Environment

Very poor diversification

The 3 months correlation between Sichuan and Road is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Road Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Road Environment Tec and Sichuan Jinshi 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 Sichuan Jinshi Technology are associated (or correlated) with Road Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Road Environment Tec has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and Road Environment go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Road Environment

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to generate 0.71 times more return on investment than Road Environment. However, Sichuan Jinshi Technology is 1.4 times less risky than Road Environment. It trades about 0.26 of its potential returns per unit of risk. Road Environment Technology is currently generating about 0.18 per unit of risk. If you would invest  492.00  in Sichuan Jinshi Technology on September 23, 2024 and sell it today you would earn a total of  236.00  from holding Sichuan Jinshi Technology or generate 47.97% return on investment over 90 days.

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

Sichuan Jinshi Technology  vs.  Road Environment Technology

Sichuan Jinshi Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 20 (%) 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.

Road Environment Tec

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Road Environment Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Road Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Jinshi and Road Environment

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

The idea behind Sichuan Jinshi Technology and Road Environment 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.