Correlation Between Industrial and Jinhui Liquor

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

By analyzing existing cross correlation between Industrial and Commercial and Jinhui Liquor Co, you can compare the effects of market volatilities on Industrial and Jinhui Liquor 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 Industrial with a short position of Jinhui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Jinhui Liquor.

Diversification Opportunities for Industrial and Jinhui Liquor

0.7

Correlation Coefficient

Industrial  Jinhui Liquor

Poor diversification

The 3 months correlation between Industrial and Jinhui is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor and Industrial 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 Industrial and Commercial are associated (or correlated) with Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of Industrial i.e., Industrial and Jinhui Liquor go up and down completely randomly.

Pair Corralation between Industrial and Jinhui Liquor

Assuming the 90 days trading horizon Industrial is expected to generate 1.76 times less return on investment than Jinhui Liquor. But when comparing it to its historical volatility, Industrial and Commercial is 2.44 times less risky than Jinhui Liquor. It trades about 0.18 of its potential returns per unit of risk. Jinhui Liquor Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,635  in Jinhui Liquor Co on September 12, 2024 and sell it today you would earn a total of  431.00  from holding Jinhui Liquor Co or generate 26.36% return on investment over 90 days.

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

Industrial and Commercial  vs.  Jinhui Liquor Co

Industrial and Commercial

Risk-Adjusted Performance

14 of 100

Good

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

Jinhui Liquor

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Industrial and Jinhui Liquor

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

The idea behind Industrial and Commercial and Jinhui Liquor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.