Correlation Between JJill and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both JJill and Guangdong Investment 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 JJill and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJill Inc and Guangdong Investment Limited, you can compare the effects of market volatilities on JJill and Guangdong Investment 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 JJill with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of JJill and Guangdong Investment.
Diversification Opportunities for JJill and Guangdong Investment
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JJill and Guangdong is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding JJill Inc and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and JJill 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 JJill Inc are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of JJill i.e., JJill and Guangdong Investment go up and down completely randomly.
Pair Corralation between JJill and Guangdong Investment
Given the investment horizon of 90 days JJill is expected to generate 9.26 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, JJill Inc is 1.33 times less risky than Guangdong Investment. It trades about 0.01 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Guangdong Investment Limited on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Guangdong Investment Limited or generate 29.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JJill Inc vs. Guangdong Investment Limited
Performance |
| Timeline |
| JJill Inc |
| Guangdong Investment |
JJill and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JJill and Guangdong Investment
The main advantage of trading using opposite JJill and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JJill position performs unexpectedly, Guangdong Investment 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 Investment will offset losses from the drop in Guangdong Investment's long position.The idea behind JJill Inc and Guangdong Investment Limited 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.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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