Correlation Between Shanghai Action and Jiangsu Financial

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

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

Diversification Opportunities for Shanghai Action and Jiangsu Financial

0.79

Correlation Coefficient

Shanghai Action  Jiangsu Financial

Poor diversification

The 3 months correlation between Shanghai and Jiangsu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Jiangsu Financial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Financial Leasing and Shanghai Action 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 Shanghai Action Education are associated (or correlated) with Jiangsu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Financial Leasing has no effect on the direction of Shanghai Action i.e., Shanghai Action and Jiangsu Financial go up and down completely randomly.

Pair Corralation between Shanghai Action and Jiangsu Financial

Assuming the 90 days trading horizon Shanghai Action is expected to generate 1.06 times less return on investment than Jiangsu Financial. In addition to that, Shanghai Action is 1.32 times more volatile than Jiangsu Financial Leasing. It trades about 0.1 of its total potential returns per unit of risk. Jiangsu Financial Leasing is currently generating about 0.14 per unit of volatility. If you would invest  428.00  in Jiangsu Financial Leasing on September 11, 2024 and sell it today you would earn a total of  90.00  from holding Jiangsu Financial Leasing or generate 21.03% return on investment over 90 days.

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

Shanghai Action Education  vs.  Jiangsu Financial Leasing

Shanghai Action Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Action Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Action sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Financial Leasing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Financial Leasing are ranked lower than 11 (%) 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.

Pair Trading with Shanghai Action and Jiangsu Financial

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

The idea behind Shanghai Action Education and Jiangsu Financial Leasing 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.