Correlation Between Jinhua Capital and American Hotel
Can any of the company-specific risk be diversified away by investing in both Jinhua Capital and American Hotel 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 Jinhua Capital and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jinhua Capital and American Hotel Income, you can compare the effects of market volatilities on Jinhua Capital and American Hotel 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 Jinhua Capital with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhua Capital and American Hotel.
Diversification Opportunities for Jinhua Capital and American Hotel
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jinhua and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jinhua Capital and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and Jinhua Capital 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 Jinhua Capital are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Jinhua Capital i.e., Jinhua Capital and American Hotel go up and down completely randomly.
Pair Corralation between Jinhua Capital and American Hotel
Assuming the 90 days horizon Jinhua Capital is expected to generate 13.54 times more return on investment than American Hotel. However, Jinhua Capital is 13.54 times more volatile than American Hotel Income. It trades about 0.14 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.4 per unit of risk. If you would invest 1.00 in Jinhua Capital on August 27, 2024 and sell it today you would earn a total of 0.00 from holding Jinhua Capital or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jinhua Capital vs. American Hotel Income
Performance |
| Timeline |
| Jinhua Capital |
| American Hotel Income |
Jinhua Capital and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jinhua Capital and American Hotel
The main advantage of trading using opposite Jinhua Capital and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jinhua Capital position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| Jinhua Capital vs. American Hotel Income | Jinhua Capital vs. Champion Iron | Jinhua Capital vs. Falcon Energy Materials | Jinhua Capital vs. Algonquin Power Utilities |
| American Hotel vs. Berkshire Hathaway CDR | American Hotel vs. Microsoft Corp CDR | American Hotel vs. Apple Inc CDR | American Hotel vs. Alphabet Inc CDR |
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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