Correlation Between Datang HuaYin and Jiangsu Xinning

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

Diversification Opportunities for Datang HuaYin and Jiangsu Xinning

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Datang and Jiangsu is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Datang HuaYin Electric and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern and Datang HuaYin 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 Datang HuaYin Electric are associated (or correlated) with Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Datang HuaYin i.e., Datang HuaYin and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Datang HuaYin and Jiangsu Xinning

Assuming the 90 days trading horizon Datang HuaYin Electric is expected to generate 0.79 times more return on investment than Jiangsu Xinning. However, Datang HuaYin Electric is 1.27 times less risky than Jiangsu Xinning. It trades about -0.39 of its potential returns per unit of risk. Jiangsu Xinning Modern is currently generating about -0.62 per unit of risk. If you would invest  360.00  in Datang HuaYin Electric on October 7, 2024 and sell it today you would lose (63.00) from holding Datang HuaYin Electric or give up 17.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Datang HuaYin Electric  vs.  Jiangsu Xinning Modern

 Performance 
       Timeline  
Datang HuaYin Electric 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Datang HuaYin Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Jiangsu Xinning Modern 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinning Modern are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinning may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Datang HuaYin and Jiangsu Xinning Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Datang HuaYin and Jiangsu Xinning

The main advantage of trading using opposite Datang HuaYin and Jiangsu Xinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang HuaYin position performs unexpectedly, Jiangsu Xinning 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 Jiangsu Xinning will offset losses from the drop in Jiangsu Xinning's long position.
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The idea behind Datang HuaYin Electric and Jiangsu Xinning Modern 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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