Correlation Between Jinsanjiang Silicon and Guangdong Liantai

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

Diversification Opportunities for Jinsanjiang Silicon and Guangdong Liantai

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Jinsanjiang and Guangdong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Jinsanjiang Silicon Material and Guangdong Liantai Environmenta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Liantai and Jinsanjiang Silicon 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 Jinsanjiang Silicon Material are associated (or correlated) with Guangdong Liantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Liantai has no effect on the direction of Jinsanjiang Silicon i.e., Jinsanjiang Silicon and Guangdong Liantai go up and down completely randomly.

Pair Corralation between Jinsanjiang Silicon and Guangdong Liantai

Assuming the 90 days trading horizon Jinsanjiang Silicon Material is expected to under-perform the Guangdong Liantai. In addition to that, Jinsanjiang Silicon is 1.41 times more volatile than Guangdong Liantai Environmental. It trades about -0.11 of its total potential returns per unit of risk. Guangdong Liantai Environmental is currently generating about 0.06 per unit of volatility. If you would invest  430.00  in Guangdong Liantai Environmental on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Guangdong Liantai Environmental or generate 2.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Jinsanjiang Silicon Material  vs.  Guangdong Liantai Environmenta

 Performance 
       Timeline  
Jinsanjiang Silicon 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinsanjiang Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.
Guangdong Liantai 

Risk-Adjusted Performance

18 of 100

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

Jinsanjiang Silicon and Guangdong Liantai Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Jinsanjiang Silicon and Guangdong Liantai

The main advantage of trading using opposite Jinsanjiang Silicon and Guangdong Liantai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jinsanjiang Silicon position performs unexpectedly, Guangdong Liantai 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 Guangdong Liantai will offset losses from the drop in Guangdong Liantai's long position.
The idea behind Jinsanjiang Silicon Material and Guangdong Liantai Environmental 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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