Correlation Between Masterwork Machinery and Jiangsu GDK

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

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

Diversification Opportunities for Masterwork Machinery and Jiangsu GDK

0.9

Correlation Coefficient

Masterwork Machinery  Jiangsu GDK

Almost no diversification

The 3 months correlation between Masterwork and Jiangsu is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery 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 Masterwork Machinery 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 Masterwork Machinery 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 Masterwork Machinery i.e., Masterwork Machinery and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Jiangsu GDK

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 0.95 times more return on investment than Jiangsu GDK. However, Masterwork Machinery is 1.05 times less risky than Jiangsu GDK. It trades about -0.13 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.26 per unit of risk. If you would invest  645.00  in Masterwork Machinery on September 25, 2024 and sell it today you would lose (52.00) from holding Masterwork Machinery or give up 8.06% of portfolio value over 90 days.

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

Masterwork Machinery  vs.  Jiangsu GDK Biotechnology

Masterwork Machinery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 9 (%) 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 Masterwork Machinery and Jiangsu GDK

The main advantage of trading using opposite Masterwork Machinery and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masterwork Machinery 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 Masterwork Machinery 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.