Correlation Between Gansu Jiu and Jiangsu GDK

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

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

Diversification Opportunities for Gansu Jiu and Jiangsu GDK

0.81

Correlation Coefficient

Gansu Jiu  Jiangsu GDK

Very poor diversification

The 3 months correlation between Gansu and Jiangsu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel 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 Gansu Jiu 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 Gansu Jiu Steel 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 Gansu Jiu i.e., Gansu Jiu and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Gansu Jiu and Jiangsu GDK

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 0.59 times more return on investment than Jiangsu GDK. However, Gansu Jiu Steel is 1.69 times less risky than Jiangsu GDK. It trades about 0.03 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.05 per unit of risk. If you would invest  158.00  in Gansu Jiu Steel on September 14, 2024 and sell it today you would earn a total of  23.00  from holding Gansu Jiu Steel or generate 14.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.62%
Values	Daily Returns

Gansu Jiu Steel  vs.  Jiangsu GDK Biotechnology

Gansu Jiu Steel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 16 (%) 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 Gansu Jiu and Jiangsu GDK

The main advantage of trading using opposite Gansu Jiu and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gansu Jiu 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 Gansu Jiu Steel 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..