Correlation Between Jiangsu GDK and Shaanxi Meineng

Can any of the company-specific risk be diversified away by investing in both Jiangsu GDK and Shaanxi Meineng 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 Shaanxi Meineng 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 Shaanxi Meineng Clean, you can compare the effects of market volatilities on Jiangsu GDK and Shaanxi Meineng 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 Shaanxi Meineng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu GDK and Shaanxi Meineng.

Diversification Opportunities for Jiangsu GDK and Shaanxi Meineng

0.89

Correlation Coefficient

Jiangsu GDK  Shaanxi Meineng

Very poor diversification

The 3 months correlation between Jiangsu and Shaanxi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Shaanxi Meineng Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Meineng Clean 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 Shaanxi Meineng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Meineng Clean has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Shaanxi Meineng go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Shaanxi Meineng

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Shaanxi Meineng. In addition to that, Jiangsu GDK is 1.33 times more volatile than Shaanxi Meineng Clean. It trades about -0.19 of its total potential returns per unit of risk. Shaanxi Meineng Clean is currently generating about -0.1 per unit of volatility. If you would invest  1,396  in Shaanxi Meineng Clean on December 2, 2024 and sell it today you would lose (164.00) from holding Shaanxi Meineng Clean or give up 11.75% of portfolio value over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Shaanxi Meineng Clean

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shaanxi Meineng Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shaanxi Meineng Clean 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 Jiangsu GDK and Shaanxi Meineng

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

The idea behind Jiangsu GDK Biotechnology and Shaanxi Meineng Clean 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.