Correlation Between Dalian Thermal and JS Corrugating

Can any of the company-specific risk be diversified away by investing in both Dalian Thermal and JS Corrugating 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 Dalian Thermal and JS Corrugating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dalian Thermal Power and JS Corrugating Machinery, you can compare the effects of market volatilities on Dalian Thermal and JS Corrugating 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 Dalian Thermal with a short position of JS Corrugating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and JS Corrugating.

Diversification Opportunities for Dalian Thermal and JS Corrugating

0.84

Correlation Coefficient

Dalian Thermal  JS Corrugating

Very poor diversification

The 3 months correlation between Dalian and 000821 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and JS Corrugating Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Corrugating Machinery and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with JS Corrugating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Corrugating Machinery has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and JS Corrugating go up and down completely randomly.

Pair Corralation between Dalian Thermal and JS Corrugating

Assuming the 90 days trading horizon Dalian Thermal Power is expected to generate 1.25 times more return on investment than JS Corrugating. However, Dalian Thermal is 1.25 times more volatile than JS Corrugating Machinery. It trades about 0.04 of its potential returns per unit of risk. JS Corrugating Machinery is currently generating about -0.01 per unit of risk. If you would invest  525.00  in Dalian Thermal Power on September 28, 2024 and sell it today you would earn a total of  186.00  from holding Dalian Thermal Power or generate 35.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Dalian Thermal Power  vs.  JS Corrugating Machinery

Dalian Thermal Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JS Corrugating Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Dalian Thermal and JS Corrugating

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

The idea behind Dalian Thermal Power and JS Corrugating Machinery 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 Transaction History module to view history of all your transactions and understand their impact on performance.