Correlation Between Super Dragon and Jiangsu GDK

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

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

Diversification Opportunities for Super Dragon and Jiangsu GDK

0.93

Correlation Coefficient

Super Dragon  Jiangsu GDK

Almost no diversification

The 3 months correlation between Super and Jiangsu is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Super Dragon Engineering Plast 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 Super Dragon 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 Super Dragon Engineering Plastics 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 Super Dragon i.e., Super Dragon and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Super Dragon and Jiangsu GDK

Assuming the 90 days trading horizon Super Dragon Engineering Plastics is expected to generate 1.01 times more return on investment than Jiangsu GDK. However, Super Dragon is 1.01 times more volatile than Jiangsu GDK Biotechnology. It trades about -0.03 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.27 per unit of risk. If you would invest  3,576  in Super Dragon Engineering Plastics on September 27, 2024 and sell it today you would lose (96.00) from holding Super Dragon Engineering Plastics or give up 2.68% of portfolio value over 90 days.

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

Super Dragon Engineering Plast  vs.  Jiangsu GDK Biotechnology

Super Dragon Enginee

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Super Dragon Engineering Plastics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Super Dragon sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 5 (%) 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 Super Dragon and Jiangsu GDK

The main advantage of trading using opposite Super Dragon and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Dragon 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 Super Dragon Engineering Plastics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.