Correlation Between Zhangjiagang Freetrade and Jiangsu GDK

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

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

Diversification Opportunities for Zhangjiagang Freetrade and Jiangsu GDK

0.93

Correlation Coefficient

Zhangjiagang Freetrade  Jiangsu GDK

Almost no diversification

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

Pair Corralation between Zhangjiagang Freetrade and Jiangsu GDK

Assuming the 90 days trading horizon Zhangjiagang Freetrade is expected to generate 1.36 times less return on investment than Jiangsu GDK. But when comparing it to its historical volatility, Zhangjiagang Freetrade Science is 1.74 times less risky than Jiangsu GDK. It trades about 0.19 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Jiangsu GDK Biotechnology on September 5, 2024 and sell it today you would earn a total of  479.00  from holding Jiangsu GDK Biotechnology or generate 43.94% return on investment over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Jiangsu GDK Biotechnology

Zhangjiagang Freetrade

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Freetrade Science are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhangjiagang Freetrade sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 11 (%) 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 Zhangjiagang Freetrade and Jiangsu GDK

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