Correlation Between Jiangsu GDK and Hubeiyichang Transportation

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

Diversification Opportunities for Jiangsu GDK and Hubeiyichang Transportation

0.89

Correlation Coefficient

Jiangsu GDK  Hubeiyichang Transportation

Very poor diversification

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

Pair Corralation between Jiangsu GDK and Hubeiyichang Transportation

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Hubeiyichang Transportation. In addition to that, Jiangsu GDK is 2.12 times more volatile than Hubeiyichang Transportation Group. It trades about -0.01 of its total potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about 0.04 per unit of volatility. If you would invest  507.00  in Hubeiyichang Transportation Group on September 25, 2024 and sell it today you would earn a total of  10.00  from holding Hubeiyichang Transportation Group or generate 1.97% return on investment over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Hubeiyichang Transportation Gr

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu GDK sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubeiyichang Transportation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubeiyichang Transportation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jiangsu GDK and Hubeiyichang Transportation

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

The idea behind Jiangsu GDK Biotechnology and Hubeiyichang Transportation Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.