Correlation Between Changchun Engley and Zhejiang JIULI

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

By analyzing existing cross correlation between Changchun Engley Automobile and Zhejiang JIULI Hi tech, you can compare the effects of market volatilities on Changchun Engley and Zhejiang JIULI 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 Changchun Engley with a short position of Zhejiang JIULI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Engley and Zhejiang JIULI.

Diversification Opportunities for Changchun Engley and Zhejiang JIULI

0.88

Correlation Coefficient

Changchun Engley  Zhejiang JIULI

Very poor diversification

The 3 months correlation between Changchun and Zhejiang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Zhejiang JIULI Hi tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang JIULI Hi and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Zhejiang JIULI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang JIULI Hi has no effect on the direction of Changchun Engley i.e., Changchun Engley and Zhejiang JIULI go up and down completely randomly.

Pair Corralation between Changchun Engley and Zhejiang JIULI

Assuming the 90 days trading horizon Changchun Engley is expected to generate 1.0 times less return on investment than Zhejiang JIULI. In addition to that, Changchun Engley is 1.25 times more volatile than Zhejiang JIULI Hi tech. It trades about 0.15 of its total potential returns per unit of risk. Zhejiang JIULI Hi tech is currently generating about 0.19 per unit of volatility. If you would invest  1,899  in Zhejiang JIULI Hi tech on September 3, 2024 and sell it today you would earn a total of  557.00  from holding Zhejiang JIULI Hi tech or generate 29.33% return on investment over 90 days.

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

Changchun Engley Automobile  vs.  Zhejiang JIULI Hi tech

Changchun Engley Aut

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun Engley Automobile are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun Engley sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang JIULI Hi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang JIULI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changchun Engley and Zhejiang JIULI

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

The idea behind Changchun Engley Automobile and Zhejiang JIULI Hi tech 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.