Correlation Between Sanxiang Advanced and Jiangsu GDK

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

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

Diversification Opportunities for Sanxiang Advanced and Jiangsu GDK

-0.15

Correlation Coefficient

Sanxiang Advanced  Jiangsu GDK

Good diversification

The 3 months correlation between Sanxiang and Jiangsu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced 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 Sanxiang Advanced 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 Sanxiang Advanced 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 Sanxiang Advanced i.e., Sanxiang Advanced and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and Jiangsu GDK

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 1.49 times more return on investment than Jiangsu GDK. However, Sanxiang Advanced is 1.49 times more volatile than Jiangsu GDK Biotechnology. It trades about 0.17 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.04 per unit of risk. If you would invest  1,650  in Sanxiang Advanced Materials on December 26, 2024 and sell it today you would earn a total of  639.00  from holding Sanxiang Advanced Materials or generate 38.73% return on investment over 90 days.

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

Sanxiang Advanced Materials  vs.  Jiangsu GDK Biotechnology

Sanxiang Advanced

Risk-Adjusted Performance

Good

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

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

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 somewhat strong basic indicators, Jiangsu GDK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sanxiang Advanced and Jiangsu GDK

The main advantage of trading using opposite Sanxiang Advanced and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanxiang Advanced 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 Sanxiang Advanced 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.