Correlation Between Jiangsu Financial and Broadex Technologies

Can any of the company-specific risk be diversified away by investing in both Jiangsu Financial and Broadex Technologies 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 Jiangsu Financial and Broadex Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Financial Leasing and Broadex Technologies Co, you can compare the effects of market volatilities on Jiangsu Financial and Broadex Technologies 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 Jiangsu Financial with a short position of Broadex Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Financial and Broadex Technologies.

Diversification Opportunities for Jiangsu Financial and Broadex Technologies

0.87

Correlation Coefficient

Jiangsu Financial  Broadex Technologies

Very poor diversification

The 3 months correlation between Jiangsu and Broadex is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Financial Leasing and Broadex Technologies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadex Technologies and Jiangsu Financial 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 Jiangsu Financial Leasing are associated (or correlated) with Broadex Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadex Technologies has no effect on the direction of Jiangsu Financial i.e., Jiangsu Financial and Broadex Technologies go up and down completely randomly.

Pair Corralation between Jiangsu Financial and Broadex Technologies

Assuming the 90 days trading horizon Jiangsu Financial Leasing is expected to generate 0.58 times more return on investment than Broadex Technologies. However, Jiangsu Financial Leasing is 1.73 times less risky than Broadex Technologies. It trades about -0.03 of its potential returns per unit of risk. Broadex Technologies Co is currently generating about -0.06 per unit of risk. If you would invest  522.00  in Jiangsu Financial Leasing on September 4, 2024 and sell it today you would lose (7.00) from holding Jiangsu Financial Leasing or give up 1.34% of portfolio value over 90 days.

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

Jiangsu Financial Leasing  vs.  Broadex Technologies Co

Jiangsu Financial Leasing

Risk-Adjusted Performance

7 of 100

OK

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

Broadex Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadex Technologies Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Broadex Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Financial and Broadex Technologies

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

The idea behind Jiangsu Financial Leasing and Broadex Technologies 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.