Correlation Between Metro Investment and Jilin Jlu

Can any of the company-specific risk be diversified away by investing in both Metro Investment and Jilin Jlu 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 Metro Investment and Jilin Jlu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metro Investment Development and Jilin Jlu Communication, you can compare the effects of market volatilities on Metro Investment and Jilin Jlu 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 Metro Investment with a short position of Jilin Jlu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Investment and Jilin Jlu.

Diversification Opportunities for Metro Investment and Jilin Jlu

0.64

Correlation Coefficient

Metro Investment  Jilin Jlu

Poor diversification

The 3 months correlation between Metro and Jilin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu Communication and Metro Investment 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 Metro Investment Development are associated (or correlated) with Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of Metro Investment i.e., Metro Investment and Jilin Jlu go up and down completely randomly.

Pair Corralation between Metro Investment and Jilin Jlu

Assuming the 90 days trading horizon Metro Investment Development is expected to under-perform the Jilin Jlu. But the stock apears to be less risky and, when comparing its historical volatility, Metro Investment Development is 1.3 times less risky than Jilin Jlu. The stock trades about -0.06 of its potential returns per unit of risk. The Jilin Jlu Communication is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  760.00  in Jilin Jlu Communication on September 26, 2024 and sell it today you would earn a total of  146.00  from holding Jilin Jlu Communication or generate 19.21% return on investment over 90 days.

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

Metro Investment Development  vs.  Jilin Jlu Communication

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jilin Jlu Communication

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Jlu Communication are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Jlu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Investment and Jilin Jlu

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

The idea behind Metro Investment Development and Jilin Jlu Communication 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.