Correlation Between Guangdong Marubi and Jiangnan Mould

Can any of the company-specific risk be diversified away by investing in both Guangdong Marubi and Jiangnan Mould 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 Guangdong Marubi and Jiangnan Mould into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Marubi Biotechnology and Jiangnan Mould Plastic, you can compare the effects of market volatilities on Guangdong Marubi and Jiangnan Mould 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 Guangdong Marubi with a short position of Jiangnan Mould. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Marubi and Jiangnan Mould.

Diversification Opportunities for Guangdong Marubi and Jiangnan Mould

0.16

Correlation Coefficient

Guangdong Marubi  Jiangnan Mould

Average diversification

The 3 months correlation between Guangdong and Jiangnan is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Marubi Biotechnology and Jiangnan Mould Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangnan Mould Plastic and Guangdong Marubi 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 Guangdong Marubi Biotechnology are associated (or correlated) with Jiangnan Mould. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangnan Mould Plastic has no effect on the direction of Guangdong Marubi i.e., Guangdong Marubi and Jiangnan Mould go up and down completely randomly.

Pair Corralation between Guangdong Marubi and Jiangnan Mould

Assuming the 90 days trading horizon Guangdong Marubi Biotechnology is expected to generate 1.1 times more return on investment than Jiangnan Mould. However, Guangdong Marubi is 1.1 times more volatile than Jiangnan Mould Plastic. It trades about 0.1 of its potential returns per unit of risk. Jiangnan Mould Plastic is currently generating about 0.03 per unit of risk. If you would invest  2,774  in Guangdong Marubi Biotechnology on October 10, 2024 and sell it today you would earn a total of  466.00  from holding Guangdong Marubi Biotechnology or generate 16.8% return on investment over 90 days.

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

Guangdong Marubi Biotechnology  vs.  Jiangnan Mould Plastic

Guangdong Marubi Bio

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangnan Mould Plastic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangnan Mould Plastic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangnan Mould is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Marubi and Jiangnan Mould

The main advantage of trading using opposite Guangdong Marubi and Jiangnan Mould positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Marubi position performs unexpectedly, Jiangnan Mould 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 Jiangnan Mould will offset losses from the drop in Jiangnan Mould's long position.

The idea behind Guangdong Marubi Biotechnology and Jiangnan Mould Plastic 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .