Correlation Between Super Dragon and Jinling Hotel

Can any of the company-specific risk be diversified away by investing in both Super Dragon and Jinling Hotel 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 Super Dragon and Jinling Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Super Dragon Engineering Plastics and Jinling Hotel Corp, you can compare the effects of market volatilities on Super Dragon and Jinling Hotel 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 Super Dragon with a short position of Jinling Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Dragon and Jinling Hotel.

Diversification Opportunities for Super Dragon and Jinling Hotel

0.88

Correlation Coefficient

Super Dragon  Jinling Hotel

Very poor diversification

The 3 months correlation between Super and Jinling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Super Dragon Engineering Plast and Jinling Hotel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinling Hotel Corp and Super Dragon 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 Super Dragon Engineering Plastics are associated (or correlated) with Jinling Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinling Hotel Corp has no effect on the direction of Super Dragon i.e., Super Dragon and Jinling Hotel go up and down completely randomly.

Pair Corralation between Super Dragon and Jinling Hotel

Assuming the 90 days trading horizon Super Dragon is expected to generate 2.49 times less return on investment than Jinling Hotel. In addition to that, Super Dragon is 1.7 times more volatile than Jinling Hotel Corp. It trades about 0.01 of its total potential returns per unit of risk. Jinling Hotel Corp is currently generating about 0.04 per unit of volatility. If you would invest  651.00  in Jinling Hotel Corp on September 27, 2024 and sell it today you would earn a total of  50.00  from holding Jinling Hotel Corp or generate 7.68% return on investment over 90 days.

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

Super Dragon Engineering Plast  vs.  Jinling Hotel Corp

Super Dragon Enginee

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Super Dragon Engineering Plastics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Super Dragon sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinling Hotel Corp

Risk-Adjusted Performance

2 of 100

Insignificant

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

Pair Trading with Super Dragon and Jinling Hotel

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

The idea behind Super Dragon Engineering Plastics and Jinling Hotel Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.