Correlation Between Beijing Jiaman and Jiangsu Financial

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

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

Diversification Opportunities for Beijing Jiaman and Jiangsu Financial

0.82

Correlation Coefficient

Beijing Jiaman  Jiangsu Financial

Very poor diversification

The 3 months correlation between Beijing and Jiangsu is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Jiaman Dress 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 Beijing Jiaman 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 Beijing Jiaman Dress 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 Beijing Jiaman i.e., Beijing Jiaman and Jiangsu Financial go up and down completely randomly.

Pair Corralation between Beijing Jiaman and Jiangsu Financial

Assuming the 90 days trading horizon Beijing Jiaman Dress is expected to generate 1.3 times more return on investment than Jiangsu Financial. However, Beijing Jiaman is 1.3 times more volatile than Jiangsu Financial Leasing. It trades about 0.14 of its potential returns per unit of risk. Jiangsu Financial Leasing is currently generating about 0.1 per unit of risk. If you would invest  1,731  in Beijing Jiaman Dress on September 23, 2024 and sell it today you would earn a total of  452.00  from holding Beijing Jiaman Dress or generate 26.11% return on investment over 90 days.

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

Beijing Jiaman Dress  vs.  Jiangsu Financial Leasing

Beijing Jiaman Dress

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Jiaman Dress are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Jiaman sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Financial Leasing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Financial Leasing are ranked lower than 7 (%) 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 Beijing Jiaman and Jiangsu Financial

The main advantage of trading using opposite Beijing Jiaman and Jiangsu Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Jiaman 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 Beijing Jiaman Dress 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.