Correlation Between Guangdong Marubi and Jiangyin Jianghua

Can any of the company-specific risk be diversified away by investing in both Guangdong Marubi and Jiangyin Jianghua 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 Jiangyin Jianghua 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 Jiangyin Jianghua Microelectronics, you can compare the effects of market volatilities on Guangdong Marubi and Jiangyin Jianghua 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 Jiangyin Jianghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Marubi and Jiangyin Jianghua.

Diversification Opportunities for Guangdong Marubi and Jiangyin Jianghua

-0.54

Correlation Coefficient

Guangdong Marubi  Jiangyin Jianghua

Excellent diversification

The 3 months correlation between Guangdong and Jiangyin is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Marubi Biotechnology and Jiangyin Jianghua Microelectro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangyin Jianghua 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 Jiangyin Jianghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangyin Jianghua has no effect on the direction of Guangdong Marubi i.e., Guangdong Marubi and Jiangyin Jianghua go up and down completely randomly.

Pair Corralation between Guangdong Marubi and Jiangyin Jianghua

Assuming the 90 days trading horizon Guangdong Marubi is expected to generate 1.11 times less return on investment than Jiangyin Jianghua. But when comparing it to its historical volatility, Guangdong Marubi Biotechnology is 1.16 times less risky than Jiangyin Jianghua. It trades about 0.1 of its potential returns per unit of risk. Jiangyin Jianghua Microelectronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,629  in Jiangyin Jianghua Microelectronics on December 2, 2024 and sell it today you would earn a total of  70.00  from holding Jiangyin Jianghua Microelectronics or generate 4.3% return on investment over 90 days.

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

Guangdong Marubi Biotechnology  vs.  Jiangyin Jianghua Microelectro

Guangdong Marubi Bio

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jiangyin Jianghua

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangyin Jianghua Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangdong Marubi and Jiangyin Jianghua

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

The idea behind Guangdong Marubi Biotechnology and Jiangyin Jianghua Microelectronics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.