Correlation Between Jiangsu Expressway and Sichuan Expressway

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

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

Diversification Opportunities for Jiangsu Expressway and Sichuan Expressway

0.79

Correlation Coefficient

Jiangsu Expressway  Sichuan Expressway

Poor diversification

The 3 months correlation between Jiangsu and Sichuan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Expressway Co and Sichuan Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Expressway and Jiangsu Expressway 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 Jiangsu Expressway Co are associated (or correlated) with Sichuan Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Expressway has no effect on the direction of Jiangsu Expressway i.e., Jiangsu Expressway and Sichuan Expressway go up and down completely randomly.

Pair Corralation between Jiangsu Expressway and Sichuan Expressway

If you would invest  2,054  in Jiangsu Expressway Co on March 28, 2024 and sell it today you would earn a total of  130.00  from holding Jiangsu Expressway Co or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	2.5%
Values	Daily Returns

Jiangsu Expressway Co  vs.  Sichuan Expressway

Jiangsu Expressway

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Jiangsu Expressway may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Sichuan Expressway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Expressway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Sichuan Expressway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Jiangsu Expressway and Sichuan Expressway

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

The idea behind Jiangsu Expressway Co and Sichuan Expressway 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.