Correlation Between Jilin Jlu and Shanghai Action

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

By analyzing existing cross correlation between Jilin Jlu Communication and Shanghai Action Education, you can compare the effects of market volatilities on Jilin Jlu and Shanghai Action 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 Jilin Jlu with a short position of Shanghai Action. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jilin Jlu and Shanghai Action.

Diversification Opportunities for Jilin Jlu and Shanghai Action

0.27

Correlation Coefficient

Jilin Jlu  Shanghai Action

Modest diversification

The 3 months correlation between Jilin and Shanghai is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Jlu Communication and Shanghai Action Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Action Education and Jilin Jlu 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 Jilin Jlu Communication are associated (or correlated) with Shanghai Action. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Action Education has no effect on the direction of Jilin Jlu i.e., Jilin Jlu and Shanghai Action go up and down completely randomly.

Pair Corralation between Jilin Jlu and Shanghai Action

Assuming the 90 days trading horizon Jilin Jlu Communication is expected to under-perform the Shanghai Action. But the stock apears to be less risky and, when comparing its historical volatility, Jilin Jlu Communication is 1.05 times less risky than Shanghai Action. The stock trades about -0.11 of its potential returns per unit of risk. The Shanghai Action Education is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,306  in Shanghai Action Education on September 28, 2024 and sell it today you would earn a total of  102.00  from holding Shanghai Action Education or generate 3.09% return on investment over 90 days.

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

Jilin Jlu Communication  vs.  Shanghai Action Education

Jilin Jlu Communication

Risk-Adjusted Performance

0 of 100

Insignificant

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

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jilin Jlu and Shanghai Action

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

The idea behind Jilin Jlu Communication and Shanghai Action Education 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.