Correlation Between Gan Yuan and Jiangxi JDL

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

By analyzing existing cross correlation between Gan Yuan Foods and Jiangxi JDL Environmental, you can compare the effects of market volatilities on Gan Yuan and Jiangxi JDL 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 Gan Yuan with a short position of Jiangxi JDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gan Yuan and Jiangxi JDL.

Diversification Opportunities for Gan Yuan and Jiangxi JDL

-0.46

Correlation Coefficient

Gan Yuan  Jiangxi JDL

Very good diversification

The 3 months correlation between Gan and Jiangxi is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Jiangxi JDL Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi JDL Environmental and Gan Yuan 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 Gan Yuan Foods are associated (or correlated) with Jiangxi JDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi JDL Environmental has no effect on the direction of Gan Yuan i.e., Gan Yuan and Jiangxi JDL go up and down completely randomly.

Pair Corralation between Gan Yuan and Jiangxi JDL

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 2.29 times more return on investment than Jiangxi JDL. However, Gan Yuan is 2.29 times more volatile than Jiangxi JDL Environmental. It trades about -0.02 of its potential returns per unit of risk. Jiangxi JDL Environmental is currently generating about -0.11 per unit of risk. If you would invest  7,640  in Gan Yuan Foods on December 4, 2024 and sell it today you would lose (458.00) from holding Gan Yuan Foods or give up 5.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gan Yuan Foods  vs.  Jiangxi JDL Environmental

Gan Yuan Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gan Yuan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gan Yuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangxi JDL Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangxi JDL Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Gan Yuan and Jiangxi JDL

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

The idea behind Gan Yuan Foods and Jiangxi JDL Environmental 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.