Correlation Between Winix and CJ ENM
Can any of the company-specific risk be diversified away by investing in both Winix and CJ ENM 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 Winix and CJ ENM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Winix Inc and CJ ENM, you can compare the effects of market volatilities on Winix and CJ ENM 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 Winix with a short position of CJ ENM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Winix and CJ ENM.
Diversification Opportunities for Winix and CJ ENM
Poor diversification
The 3 months correlation between Winix and 035760 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Winix Inc and CJ ENM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ ENM and Winix 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 Winix Inc are associated (or correlated) with CJ ENM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ ENM has no effect on the direction of Winix i.e., Winix and CJ ENM go up and down completely randomly.
Pair Corralation between Winix and CJ ENM
Assuming the 90 days trading horizon Winix Inc is expected to under-perform the CJ ENM. But the stock apears to be less risky and, when comparing its historical volatility, Winix Inc is 1.56 times less risky than CJ ENM. The stock trades about -0.26 of its potential returns per unit of risk. The CJ ENM is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 7,340,000 in CJ ENM on August 28, 2024 and sell it today you would lose (1,270,000) from holding CJ ENM or give up 17.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Winix Inc vs. CJ ENM
Performance |
| Timeline |
| Winix Inc |
| CJ ENM |
Winix and CJ ENM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Winix and CJ ENM
The main advantage of trading using opposite Winix and CJ ENM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winix position performs unexpectedly, CJ ENM 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 CJ ENM will offset losses from the drop in CJ ENM's long position.The idea behind Winix Inc and CJ ENM 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.
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