Correlation Between Jiangsu GDK and Tianjin Capital

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

Diversification Opportunities for Jiangsu GDK and Tianjin Capital

0.66

Correlation Coefficient

Jiangsu GDK  Tianjin Capital

Poor diversification

The 3 months correlation between Jiangsu and Tianjin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi 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 Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Tianjin Capital go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Tianjin Capital

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Tianjin Capital. In addition to that, Jiangsu GDK is 2.14 times more volatile than Tianjin Capital Environmental. It trades about -0.54 of its total potential returns per unit of risk. Tianjin Capital Environmental is currently generating about -0.31 per unit of volatility. If you would invest  620.00  in Tianjin Capital Environmental on October 8, 2024 and sell it today you would lose (48.00) from holding Tianjin Capital Environmental or give up 7.74% 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.  Tianjin Capital Environmental

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tianjin Capital Envi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Capital Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tianjin Capital 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 Tianjin Capital

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

The idea behind Jiangsu GDK Biotechnology and Tianjin Capital Environmental 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.