Correlation Between Jiangsu GDK and Hengli Industrial

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

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

Diversification Opportunities for Jiangsu GDK and Hengli Industrial

0.71

Correlation Coefficient

Jiangsu GDK  Hengli Industrial

Poor diversification

The 3 months correlation between Jiangsu and Hengli is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial and Jiangsu GDK 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 Jiangsu GDK Biotechnology are associated (or correlated) with Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Hengli Industrial go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Hengli Industrial

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Hengli Industrial. In addition to that, Jiangsu GDK is 1.06 times more volatile than Hengli Industrial Development. It trades about -0.05 of its total potential returns per unit of risk. Hengli Industrial Development is currently generating about -0.03 per unit of volatility. If you would invest  438.00  in Hengli Industrial Development on October 10, 2024 and sell it today you would lose (216.00) from holding Hengli Industrial Development or give up 49.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Jiangsu GDK Biotechnology  vs.  Hengli Industrial Development

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

0 of 100

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 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.

Hengli Industrial

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Jiangsu GDK and Hengli Industrial

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

The idea behind Jiangsu GDK Biotechnology and Hengli Industrial Development 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.