Correlation Between Jiangsu GDK and Shantou Wanshun

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

Diversification Opportunities for Jiangsu GDK and Shantou Wanshun

0.61

Correlation Coefficient

Jiangsu GDK  Shantou Wanshun

Poor diversification

The 3 months correlation between Jiangsu and Shantou is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Shantou Wanshun Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantou Wanshun Package 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 Shantou Wanshun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantou Wanshun Package has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Shantou Wanshun go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Shantou Wanshun

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Shantou Wanshun. In addition to that, Jiangsu GDK is 1.16 times more volatile than Shantou Wanshun Package. It trades about -0.05 of its total potential returns per unit of risk. Shantou Wanshun Package is currently generating about -0.03 per unit of volatility. If you would invest  935.00  in Shantou Wanshun Package on October 10, 2024 and sell it today you would lose (469.00) from holding Shantou Wanshun Package or give up 50.16% of portfolio value over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Shantou Wanshun Package

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.

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shantou Wanshun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangsu GDK and Shantou Wanshun

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

The idea behind Jiangsu GDK Biotechnology and Shantou Wanshun Package 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.