Correlation Between Beijing Jiaman and Jiangsu GDK

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

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

Diversification Opportunities for Beijing Jiaman and Jiangsu GDK

0.74

Correlation Coefficient

Beijing Jiaman  Jiangsu GDK

Poor diversification

The 3 months correlation between Beijing and Jiangsu is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Jiaman Dress 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 Beijing Jiaman 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 Beijing Jiaman Dress 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 Beijing Jiaman i.e., Beijing Jiaman and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Beijing Jiaman and Jiangsu GDK

Assuming the 90 days trading horizon Beijing Jiaman is expected to generate 1.33 times less return on investment than Jiangsu GDK. But when comparing it to its historical volatility, Beijing Jiaman Dress is 1.49 times less risky than Jiangsu GDK. It trades about 0.07 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  987.00  in Jiangsu GDK Biotechnology on October 24, 2024 and sell it today you would earn a total of  146.00  from holding Jiangsu GDK Biotechnology or generate 14.79% return on investment over 90 days.

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

Beijing Jiaman Dress  vs.  Jiangsu GDK Biotechnology

Beijing Jiaman Dress

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu GDK Biotechnology 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 Beijing Jiaman and Jiangsu GDK

The main advantage of trading using opposite Beijing Jiaman and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Jiaman 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 Beijing Jiaman Dress 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.