Correlation Between Jiangsu GDK and Fiberhome Telecommunicatio

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

Diversification Opportunities for Jiangsu GDK and Fiberhome Telecommunicatio

0.05

Correlation Coefficient

Jiangsu GDK  Fiberhome Telecommunicatio

Significant diversification

The 3 months correlation between Jiangsu and Fiberhome is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Fiberhome Telecommunicatio. In addition to that, Jiangsu GDK is 1.17 times more volatile than Fiberhome Telecommunication Technologies. It trades about -0.04 of its total potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about 0.07 per unit of volatility. If you would invest  1,746  in Fiberhome Telecommunication Technologies on October 23, 2024 and sell it today you would earn a total of  174.00  from holding Fiberhome Telecommunication Technologies or generate 9.97% return on investment over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Fiberhome Telecommunication Te

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.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jiangsu GDK and Fiberhome Telecommunicatio

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

The idea behind Jiangsu GDK Biotechnology and Fiberhome Telecommunication Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.