Correlation Between Jinhui Liquor and Chengdu B

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

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

Diversification Opportunities for Jinhui Liquor and Chengdu B

0.89

Correlation Coefficient

Jinhui Liquor  Chengdu B

Very poor diversification

The 3 months correlation between Jinhui and Chengdu is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Chengdu B ray Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu B ray and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Chengdu B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu B ray has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Chengdu B go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Chengdu B

Assuming the 90 days trading horizon Jinhui Liquor is expected to generate 1.26 times less return on investment than Chengdu B. In addition to that, Jinhui Liquor is 1.08 times more volatile than Chengdu B ray Media. It trades about 0.18 of its total potential returns per unit of risk. Chengdu B ray Media is currently generating about 0.24 per unit of volatility. If you would invest  349.00  in Chengdu B ray Media on September 14, 2024 and sell it today you would earn a total of  186.00  from holding Chengdu B ray Media or generate 53.3% return on investment over 90 days.

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

Jinhui Liquor Co  vs.  Chengdu B ray Media

Jinhui Liquor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Liquor Co are ranked lower than 13 (%) 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.

Chengdu B ray

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu B ray Media are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinhui Liquor and Chengdu B

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

The idea behind Jinhui Liquor Co and Chengdu B ray Media 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.