Correlation Between Railway Signal and Jinhui Mining

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

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

Diversification Opportunities for Railway Signal and Jinhui Mining

0.6

Correlation Coefficient

Railway Signal  Jinhui Mining

Poor diversification

The 3 months correlation between Railway and Jinhui is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Railway Signal Communication and Jinhui Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Mining and Railway Signal 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 Railway Signal Communication are associated (or correlated) with Jinhui Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Mining has no effect on the direction of Railway Signal i.e., Railway Signal and Jinhui Mining go up and down completely randomly.

Pair Corralation between Railway Signal and Jinhui Mining

Assuming the 90 days trading horizon Railway Signal Communication is expected to generate 1.35 times more return on investment than Jinhui Mining. However, Railway Signal is 1.35 times more volatile than Jinhui Mining Co. It trades about 0.0 of its potential returns per unit of risk. Jinhui Mining Co is currently generating about -0.07 per unit of risk. If you would invest  629.00  in Railway Signal Communication on September 29, 2024 and sell it today you would lose (8.00) from holding Railway Signal Communication or give up 1.27% of portfolio value over 90 days.

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

Railway Signal Communication  vs.  Jinhui Mining Co

Railway Signal Commu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Railway Signal Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Railway Signal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinhui Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinhui Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Railway Signal and Jinhui Mining

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

The idea behind Railway Signal Communication and Jinhui Mining 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.