Correlation Between China Jo and Rite Aid

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

By analyzing existing cross correlation between China Jo Jo Drugstores and Rite Aid, you can compare the effects of market volatilities on China Jo and Rite Aid 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 Jo with a short position of Rite Aid. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Jo and Rite Aid.

Diversification Opportunities for China Jo and Rite Aid

0.79

Correlation Coefficient

China Jo  Rite Aid

Poor diversification

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

Pair Corralation between China Jo and Rite Aid

Given the investment horizon of 90 days China Jo Jo Drugstores is expected to generate 1.19 times more return on investment than Rite Aid. However, China Jo is 1.19 times more volatile than Rite Aid. It trades about 0.01 of its potential returns per unit of risk. Rite Aid is currently generating about -0.05 per unit of risk. If you would invest  3,360  in China Jo Jo Drugstores on January 31, 2024 and sell it today you would lose (3,120) from holding China Jo Jo Drugstores or give up 92.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.78%
Values	Daily Returns

China Jo Jo Drugstores  vs.  Rite Aid

China Jo Jo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Jo Jo Drugstores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rite Aid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Jo and Rite Aid

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

The idea behind China Jo Jo Drugstores and Rite Aid 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.