Correlation Between Jia Jie and China Steel

Can any of the company-specific risk be diversified away by investing in both Jia Jie and China Steel 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 Jia Jie and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jia Jie Biomedical and China Steel Structure, you can compare the effects of market volatilities on Jia Jie and China Steel 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 Jia Jie with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jia Jie and China Steel.

Diversification Opportunities for Jia Jie and China Steel

0.75

Correlation Coefficient

Jia Jie  China Steel

Poor diversification

The 3 months correlation between Jia and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jia Jie Biomedical and China Steel Structure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Structure and Jia Jie 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 Jia Jie Biomedical are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Structure has no effect on the direction of Jia Jie i.e., Jia Jie and China Steel go up and down completely randomly.

Pair Corralation between Jia Jie and China Steel

Assuming the 90 days trading horizon Jia Jie Biomedical is expected to generate 2.14 times more return on investment than China Steel. However, Jia Jie is 2.14 times more volatile than China Steel Structure. It trades about 0.05 of its potential returns per unit of risk. China Steel Structure is currently generating about -0.02 per unit of risk. If you would invest  1,437  in Jia Jie Biomedical on September 25, 2024 and sell it today you would earn a total of  743.00  from holding Jia Jie Biomedical or generate 51.7% return on investment over 90 days.

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

Jia Jie Biomedical  vs.  China Steel Structure

Jia Jie Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jia Jie Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

China Steel Structure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Structure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Jia Jie and China Steel

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

The idea behind Jia Jie Biomedical and China Steel Structure 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.