Correlation Between Zhejiang Juhua and Runjian Communication

Can any of the company-specific risk be diversified away by investing in both Zhejiang Juhua and Runjian Communication 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 Zhejiang Juhua and Runjian Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Juhua Co and Runjian Communication Co, you can compare the effects of market volatilities on Zhejiang Juhua and Runjian Communication 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 Zhejiang Juhua with a short position of Runjian Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Juhua and Runjian Communication.

Diversification Opportunities for Zhejiang Juhua and Runjian Communication

0.82

Correlation Coefficient

Zhejiang Juhua  Runjian Communication

Very poor diversification

The 3 months correlation between Zhejiang and Runjian is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Runjian Communication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Runjian Communication and Zhejiang Juhua 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 Zhejiang Juhua Co are associated (or correlated) with Runjian Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Runjian Communication has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Runjian Communication go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Runjian Communication

Assuming the 90 days trading horizon Zhejiang Juhua is expected to generate 1.37 times less return on investment than Runjian Communication. But when comparing it to its historical volatility, Zhejiang Juhua Co is 1.31 times less risky than Runjian Communication. It trades about 0.05 of its potential returns per unit of risk. Runjian Communication Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,225  in Runjian Communication Co on September 29, 2024 and sell it today you would earn a total of  205.00  from holding Runjian Communication Co or generate 6.36% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Runjian Communication Co

Zhejiang Juhua

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Runjian Communication

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Runjian Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhejiang Juhua and Runjian Communication

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

The idea behind Zhejiang Juhua Co and Runjian Communication Co 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.