Correlation Between Sinosteel Engineering and Xiamen Jihong

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Can any of the company-specific risk be diversified away by investing in both Sinosteel Engineering and Xiamen Jihong 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 Sinosteel Engineering and Xiamen Jihong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sinosteel Engineering and and Xiamen Jihong Package, you can compare the effects of market volatilities on Sinosteel Engineering and Xiamen Jihong 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 Sinosteel Engineering with a short position of Xiamen Jihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Engineering and Xiamen Jihong.

Diversification Opportunities for Sinosteel Engineering and Xiamen Jihong

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Sinosteel and Xiamen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Engineering and and Xiamen Jihong Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Jihong Package and Sinosteel Engineering 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 Sinosteel Engineering and are associated (or correlated) with Xiamen Jihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Jihong Package has no effect on the direction of Sinosteel Engineering i.e., Sinosteel Engineering and Xiamen Jihong go up and down completely randomly.

Pair Corralation between Sinosteel Engineering and Xiamen Jihong

Assuming the 90 days trading horizon Sinosteel Engineering is expected to generate 1.51 times less return on investment than Xiamen Jihong. But when comparing it to its historical volatility, Sinosteel Engineering and is 1.3 times less risky than Xiamen Jihong. It trades about 0.06 of its potential returns per unit of risk. Xiamen Jihong Package is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,237  in Xiamen Jihong Package on September 5, 2024 and sell it today you would earn a total of  291.00  from holding Xiamen Jihong Package or generate 23.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Sinosteel Engineering and  vs.  Xiamen Jihong Package

 Performance 
       Timeline  
Sinosteel Engineering and 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Engineering and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.
Xiamen Jihong Package 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Jihong Package are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Jihong sustained solid returns over the last few months and may actually be approaching a breakup point.

Sinosteel Engineering and Xiamen Jihong Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sinosteel Engineering and Xiamen Jihong

The main advantage of trading using opposite Sinosteel Engineering and Xiamen Jihong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinosteel Engineering position performs unexpectedly, Xiamen Jihong 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 Xiamen Jihong will offset losses from the drop in Xiamen Jihong's long position.
The idea behind Sinosteel Engineering and and Xiamen Jihong Package 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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