Correlation Between Weihai Honglin and Jiangxi Selon

Can any of the company-specific risk be diversified away by investing in both Weihai Honglin and Jiangxi Selon 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 Weihai Honglin and Jiangxi Selon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weihai Honglin Electronic and Jiangxi Selon Industrial, you can compare the effects of market volatilities on Weihai Honglin and Jiangxi Selon 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 Weihai Honglin with a short position of Jiangxi Selon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weihai Honglin and Jiangxi Selon.

Diversification Opportunities for Weihai Honglin and Jiangxi Selon

0.58

Correlation Coefficient

Weihai Honglin  Jiangxi Selon

Very weak diversification

The 3 months correlation between Weihai and Jiangxi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Weihai Honglin Electronic and Jiangxi Selon Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Selon Industrial and Weihai Honglin 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 Weihai Honglin Electronic are associated (or correlated) with Jiangxi Selon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Selon Industrial has no effect on the direction of Weihai Honglin i.e., Weihai Honglin and Jiangxi Selon go up and down completely randomly.

Pair Corralation between Weihai Honglin and Jiangxi Selon

Assuming the 90 days trading horizon Weihai Honglin is expected to generate 3.01 times less return on investment than Jiangxi Selon. In addition to that, Weihai Honglin is 1.34 times more volatile than Jiangxi Selon Industrial. It trades about 0.06 of its total potential returns per unit of risk. Jiangxi Selon Industrial is currently generating about 0.24 per unit of volatility. If you would invest  596.00  in Jiangxi Selon Industrial on September 29, 2024 and sell it today you would earn a total of  220.00  from holding Jiangxi Selon Industrial or generate 36.91% return on investment over 90 days.

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

Weihai Honglin Electronic  vs.  Jiangxi Selon Industrial

Weihai Honglin Electronic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weihai Honglin Electronic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weihai Honglin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jiangxi Selon Industrial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Selon Industrial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Selon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weihai Honglin and Jiangxi Selon

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

The idea behind Weihai Honglin Electronic and Jiangxi Selon Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.