Correlation Between China Fund and Jiaozuo Wanfang

Can any of the company-specific risk be diversified away by investing in both China Fund and Jiaozuo Wanfang 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 China Fund and Jiaozuo Wanfang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Fund Management and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on China Fund and Jiaozuo Wanfang 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 China Fund with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Fund and Jiaozuo Wanfang.

Diversification Opportunities for China Fund and Jiaozuo Wanfang

-0.63

Correlation Coefficient

China Fund  Jiaozuo Wanfang

Excellent diversification

The 3 months correlation between China and Jiaozuo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Fund Management and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and China Fund 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 China Fund Management are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of China Fund i.e., China Fund and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between China Fund and Jiaozuo Wanfang

Assuming the 90 days trading horizon China Fund Management is expected to under-perform the Jiaozuo Wanfang. But the stock apears to be less risky and, when comparing its historical volatility, China Fund Management is 9.72 times less risky than Jiaozuo Wanfang. The stock trades about -0.08 of its potential returns per unit of risk. The Jiaozuo Wanfang Aluminum is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  530.00  in Jiaozuo Wanfang Aluminum on September 3, 2024 and sell it today you would earn a total of  149.00  from holding Jiaozuo Wanfang Aluminum or generate 28.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

China Fund Management  vs.  Jiaozuo Wanfang Aluminum

China Fund Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Fund Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Fund and Jiaozuo Wanfang

The main advantage of trading using opposite China Fund and Jiaozuo Wanfang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Fund position performs unexpectedly, Jiaozuo Wanfang 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 Jiaozuo Wanfang will offset losses from the drop in Jiaozuo Wanfang's long position.

The idea behind China Fund Management and Jiaozuo Wanfang Aluminum 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.