Correlation Between Jiangsu GDK and Wuhan Yangtze

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

Diversification Opportunities for Jiangsu GDK and Wuhan Yangtze

0.69

Correlation Coefficient

Jiangsu GDK  Wuhan Yangtze

Poor diversification

The 3 months correlation between Jiangsu and Wuhan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun 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 Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Wuhan Yangtze go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Wuhan Yangtze

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Wuhan Yangtze. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu GDK Biotechnology is 1.45 times less risky than Wuhan Yangtze. The stock trades about -0.04 of its potential returns per unit of risk. The Wuhan Yangtze Communication is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,865  in Wuhan Yangtze Communication on October 23, 2024 and sell it today you would earn a total of  365.00  from holding Wuhan Yangtze Communication or generate 19.57% return on investment over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Wuhan Yangtze Communication

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.

Wuhan Yangtze Commun

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu GDK and Wuhan Yangtze

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

The idea behind Jiangsu GDK Biotechnology and Wuhan Yangtze Communication 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.