Correlation Between Jiangsu GDK and Aurora Optoelectronics

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

Diversification Opportunities for Jiangsu GDK and Aurora Optoelectronics

0.8

Correlation Coefficient

Jiangsu GDK  Aurora Optoelectronics

Very poor diversification

The 3 months correlation between Jiangsu and Aurora is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Aurora Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Optoelectronics 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 Aurora Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Optoelectronics has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Aurora Optoelectronics go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Aurora Optoelectronics

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Aurora Optoelectronics. In addition to that, Jiangsu GDK is 1.09 times more volatile than Aurora Optoelectronics Co. It trades about -0.01 of its total potential returns per unit of risk. Aurora Optoelectronics Co is currently generating about 0.07 per unit of volatility. If you would invest  159.00  in Aurora Optoelectronics Co on October 2, 2024 and sell it today you would earn a total of  91.00  from holding Aurora Optoelectronics Co or generate 57.23% 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.  Aurora Optoelectronics Co

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

Aurora Optoelectronics

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Jiangsu GDK and Aurora Optoelectronics

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

The idea behind Jiangsu GDK Biotechnology and Aurora Optoelectronics Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.