Correlation Between Yunnan Chihong and Jiangxi Ganfeng

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

By analyzing existing cross correlation between Yunnan Chihong ZincGermanium and Jiangxi Ganfeng Lithium, you can compare the effects of market volatilities on Yunnan Chihong and Jiangxi Ganfeng 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 Yunnan Chihong with a short position of Jiangxi Ganfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Chihong and Jiangxi Ganfeng.

Diversification Opportunities for Yunnan Chihong and Jiangxi Ganfeng

0.71

Correlation Coefficient

Yunnan Chihong  Jiangxi Ganfeng

Poor diversification

The 3 months correlation between Yunnan and Jiangxi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Chihong ZincGermanium and Jiangxi Ganfeng Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Ganfeng Lithium and Yunnan Chihong 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 Yunnan Chihong ZincGermanium are associated (or correlated) with Jiangxi Ganfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Ganfeng Lithium has no effect on the direction of Yunnan Chihong i.e., Yunnan Chihong and Jiangxi Ganfeng go up and down completely randomly.

Pair Corralation between Yunnan Chihong and Jiangxi Ganfeng

Assuming the 90 days trading horizon Yunnan Chihong is expected to generate 7.26 times less return on investment than Jiangxi Ganfeng. But when comparing it to its historical volatility, Yunnan Chihong ZincGermanium is 1.8 times less risky than Jiangxi Ganfeng. It trades about 0.01 of its potential returns per unit of risk. Jiangxi Ganfeng Lithium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,447  in Jiangxi Ganfeng Lithium on September 28, 2024 and sell it today you would earn a total of  155.00  from holding Jiangxi Ganfeng Lithium or generate 4.5% return on investment over 90 days.

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

Yunnan Chihong ZincGermanium  vs.  Jiangxi Ganfeng Lithium

Yunnan Chihong ZincG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yunnan Chihong ZincGermanium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yunnan Chihong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangxi Ganfeng Lithium

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Yunnan Chihong and Jiangxi Ganfeng

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

The idea behind Yunnan Chihong ZincGermanium and Jiangxi Ganfeng Lithium 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.