Correlation Between Fuda Alloy and Jiangsu GDK

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

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

Diversification Opportunities for Fuda Alloy and Jiangsu GDK

0.91

Correlation Coefficient

Fuda Alloy  Jiangsu GDK

Almost no diversification

The 3 months correlation between Fuda and Jiangsu is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fuda Alloy Materials 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 Fuda Alloy 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 Fuda Alloy Materials 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 Fuda Alloy i.e., Fuda Alloy and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Fuda Alloy and Jiangsu GDK

Assuming the 90 days trading horizon Fuda Alloy Materials is expected to under-perform the Jiangsu GDK. But the stock apears to be less risky and, when comparing its historical volatility, Fuda Alloy Materials is 1.42 times less risky than Jiangsu GDK. The stock trades about -0.15 of its potential returns per unit of risk. The Jiangsu GDK Biotechnology is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,455  in Jiangsu GDK Biotechnology on September 27, 2024 and sell it today you would lose (189.00) from holding Jiangsu GDK Biotechnology or give up 12.99% of portfolio value over 90 days.

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

Fuda Alloy Materials  vs.  Jiangsu GDK Biotechnology

Fuda Alloy Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fuda Alloy Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuda Alloy 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 Fuda Alloy and Jiangsu GDK

The main advantage of trading using opposite Fuda Alloy and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuda Alloy 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 Fuda Alloy Materials 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.