Correlation Between Yingde Greatchem and Jiangsu Financial

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

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Jiangsu Financial Leasing, you can compare the effects of market volatilities on Yingde Greatchem and Jiangsu Financial 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 Yingde Greatchem with a short position of Jiangsu Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Jiangsu Financial.

Diversification Opportunities for Yingde Greatchem and Jiangsu Financial

0.86

Correlation Coefficient

Yingde Greatchem  Jiangsu Financial

Very poor diversification

The 3 months correlation between Yingde and Jiangsu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Jiangsu Financial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Financial Leasing and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Jiangsu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Financial Leasing has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Jiangsu Financial go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Jiangsu Financial

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to generate 1.26 times more return on investment than Jiangsu Financial. However, Yingde Greatchem is 1.26 times more volatile than Jiangsu Financial Leasing. It trades about 0.15 of its potential returns per unit of risk. Jiangsu Financial Leasing is currently generating about 0.15 per unit of risk. If you would invest  2,036  in Yingde Greatchem Chemicals on September 12, 2024 and sell it today you would earn a total of  558.00  from holding Yingde Greatchem Chemicals or generate 27.41% return on investment over 90 days.

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

Yingde Greatchem Chemicals  vs.  Jiangsu Financial Leasing

Yingde Greatchem Che

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yingde Greatchem sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Financial Leasing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Financial Leasing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yingde Greatchem and Jiangsu Financial

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

The idea behind Yingde Greatchem Chemicals and Jiangsu Financial Leasing 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.