Correlation Between Zhongshan Broad and Jiangsu GDK

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

By analyzing existing cross correlation between Zhongshan Broad Ocean Motor and Jiangsu GDK Biotechnology, you can compare the effects of market volatilities on Zhongshan Broad and Jiangsu GDK 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 Zhongshan Broad with a short position of Jiangsu GDK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad and Jiangsu GDK.

Diversification Opportunities for Zhongshan Broad and Jiangsu GDK

0.88

Correlation Coefficient

Zhongshan Broad  Jiangsu GDK

Very poor diversification

The 3 months correlation between Zhongshan and Jiangsu is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Jiangsu GDK Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu GDK Biotechnology and Zhongshan Broad 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 Zhongshan Broad Ocean Motor are associated (or correlated) with Jiangsu GDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu GDK Biotechnology has no effect on the direction of Zhongshan Broad i.e., Zhongshan Broad and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Zhongshan Broad and Jiangsu GDK

Assuming the 90 days trading horizon Zhongshan Broad is expected to generate 2.19 times less return on investment than Jiangsu GDK. But when comparing it to its historical volatility, Zhongshan Broad Ocean Motor is 2.12 times less risky than Jiangsu GDK. It trades about 0.08 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,301  in Jiangsu GDK Biotechnology on September 22, 2024 and sell it today you would earn a total of  131.00  from holding Jiangsu GDK Biotechnology or generate 10.07% return on investment over 90 days.

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

Zhongshan Broad Ocean Motor  vs.  Jiangsu GDK Biotechnology

Zhongshan Broad Ocean

Risk-Adjusted Performance

10 of 100

OK

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

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu GDK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongshan Broad and Jiangsu GDK

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

The idea behind Zhongshan Broad Ocean Motor and Jiangsu GDK Biotechnology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.