Correlation Between Bright Led and Jia Jie
Can any of the company-specific risk be diversified away by investing in both Bright Led and Jia Jie 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 Bright Led and Jia Jie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bright Led Electronics and Jia Jie Biomedical, you can compare the effects of market volatilities on Bright Led and Jia Jie 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 Bright Led with a short position of Jia Jie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Led and Jia Jie.
Diversification Opportunities for Bright Led and Jia Jie
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bright and Jia is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bright Led Electronics and Jia Jie Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jia Jie Biomedical and Bright Led 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 Bright Led Electronics are associated (or correlated) with Jia Jie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jia Jie Biomedical has no effect on the direction of Bright Led i.e., Bright Led and Jia Jie go up and down completely randomly.
Pair Corralation between Bright Led and Jia Jie
Assuming the 90 days trading horizon Bright Led Electronics is expected to under-perform the Jia Jie. But the stock apears to be less risky and, when comparing its historical volatility, Bright Led Electronics is 1.76 times less risky than Jia Jie. The stock trades about -0.17 of its potential returns per unit of risk. The Jia Jie Biomedical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,020 in Jia Jie Biomedical on November 5, 2024 and sell it today you would earn a total of 100.00 from holding Jia Jie Biomedical or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bright Led Electronics vs. Jia Jie Biomedical
Performance |
| Timeline |
| Bright Led Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Jia Jie Biomedical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bright Led and Jia Jie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bright Led and Jia Jie
The main advantage of trading using opposite Bright Led and Jia Jie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Led position performs unexpectedly, Jia Jie 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 Jia Jie will offset losses from the drop in Jia Jie's long position.The idea behind Bright Led Electronics and Jia Jie Biomedical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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