Correlation Between Guangdong Jingyi and Jiangsu Broadcasting

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Can any of the company-specific risk be diversified away by investing in both Guangdong Jingyi and Jiangsu Broadcasting 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 Guangdong Jingyi and Jiangsu Broadcasting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Jingyi Metal and Jiangsu Broadcasting Cable, you can compare the effects of market volatilities on Guangdong Jingyi and Jiangsu Broadcasting 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 Guangdong Jingyi with a short position of Jiangsu Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and Jiangsu Broadcasting.

Diversification Opportunities for Guangdong Jingyi and Jiangsu Broadcasting

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Guangdong and Jiangsu is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and Jiangsu Broadcasting Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Broadcasting and Guangdong Jingyi 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 Guangdong Jingyi Metal are associated (or correlated) with Jiangsu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Broadcasting has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and Jiangsu Broadcasting go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and Jiangsu Broadcasting

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to generate 0.97 times more return on investment than Jiangsu Broadcasting. However, Guangdong Jingyi Metal is 1.03 times less risky than Jiangsu Broadcasting. It trades about 0.25 of its potential returns per unit of risk. Jiangsu Broadcasting Cable is currently generating about 0.19 per unit of risk. If you would invest  506.00  in Guangdong Jingyi Metal on September 21, 2024 and sell it today you would earn a total of  238.00  from holding Guangdong Jingyi Metal or generate 47.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Guangdong Jingyi Metal  vs.  Jiangsu Broadcasting Cable

 Performance 
       Timeline  
Guangdong Jingyi Metal 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.
Jiangsu Broadcasting 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Broadcasting Cable are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Broadcasting sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jingyi and Jiangsu Broadcasting Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangdong Jingyi and Jiangsu Broadcasting

The main advantage of trading using opposite Guangdong Jingyi and Jiangsu Broadcasting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Jingyi position performs unexpectedly, Jiangsu Broadcasting 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 Broadcasting will offset losses from the drop in Jiangsu Broadcasting's long position.
The idea behind Guangdong Jingyi Metal and Jiangsu Broadcasting Cable 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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