Correlation Between Wanhua Chemical and Jiangxi Copper

Can any of the company-specific risk be diversified away by investing in both Wanhua Chemical and Jiangxi Copper 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 Wanhua Chemical and Jiangxi Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wanhua Chemical Group and Jiangxi Copper Co, you can compare the effects of market volatilities on Wanhua Chemical and Jiangxi Copper 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 Wanhua Chemical with a short position of Jiangxi Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wanhua Chemical and Jiangxi Copper.

Diversification Opportunities for Wanhua Chemical and Jiangxi Copper

0.85

Correlation Coefficient

Wanhua Chemical  Jiangxi Copper

Very poor diversification

The 3 months correlation between Wanhua and Jiangxi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Wanhua Chemical Group and Jiangxi Copper Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Copper and Wanhua Chemical 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 Wanhua Chemical Group are associated (or correlated) with Jiangxi Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Copper has no effect on the direction of Wanhua Chemical i.e., Wanhua Chemical and Jiangxi Copper go up and down completely randomly.

Pair Corralation between Wanhua Chemical and Jiangxi Copper

Assuming the 90 days trading horizon Wanhua Chemical Group is expected to generate 0.9 times more return on investment than Jiangxi Copper. However, Wanhua Chemical Group is 1.11 times less risky than Jiangxi Copper. It trades about -0.24 of its potential returns per unit of risk. Jiangxi Copper Co is currently generating about -0.23 per unit of risk. If you would invest  7,960  in Wanhua Chemical Group on August 28, 2024 and sell it today you would lose (660.00) from holding Wanhua Chemical Group or give up 8.29% of portfolio value over 90 days.

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

Wanhua Chemical Group  vs.  Jiangxi Copper Co

Wanhua Chemical Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wanhua Chemical Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wanhua Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Jiangxi Copper

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Copper Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Copper may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Wanhua Chemical and Jiangxi Copper

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

The idea behind Wanhua Chemical Group and Jiangxi Copper Co 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.