Correlation Between Allied Machinery and Sichuan Jinshi

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

Diversification Opportunities for Allied Machinery and Sichuan Jinshi

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Allied and Sichuan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Allied Machinery Co and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and Allied Machinery 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 Allied Machinery Co are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Allied Machinery i.e., Allied Machinery and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Allied Machinery and Sichuan Jinshi

Assuming the 90 days trading horizon Allied Machinery Co is expected to under-perform the Sichuan Jinshi. In addition to that, Allied Machinery is 1.03 times more volatile than Sichuan Jinshi Technology. It trades about -0.04 of its total potential returns per unit of risk. Sichuan Jinshi Technology is currently generating about 0.01 per unit of volatility. If you would invest  685.00  in Sichuan Jinshi Technology on August 25, 2024 and sell it today you would earn a total of  6.00  from holding Sichuan Jinshi Technology or generate 0.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Allied Machinery Co  vs.  Sichuan Jinshi Technology

 Performance 
       Timeline  
Allied Machinery 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Allied Machinery Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allied Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.
Sichuan Jinshi Technology 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Allied Machinery and Sichuan Jinshi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allied Machinery and Sichuan Jinshi

The main advantage of trading using opposite Allied Machinery and Sichuan Jinshi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Machinery position performs unexpectedly, Sichuan Jinshi 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 Sichuan Jinshi will offset losses from the drop in Sichuan Jinshi's long position.
The idea behind Allied Machinery Co and Sichuan Jinshi Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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