Correlation Between Jiangsu GDK and Guangdong Cellwise

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

Diversification Opportunities for Jiangsu GDK and Guangdong Cellwise

0.51

Correlation Coefficient

Jiangsu GDK  Guangdong Cellwise

Very weak diversification

The 3 months correlation between Jiangsu and Guangdong is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Guangdong Cellwise Microelectr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Cellwise 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 Guangdong Cellwise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Cellwise has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Guangdong Cellwise go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Guangdong Cellwise

Assuming the 90 days trading horizon Jiangsu GDK Biotechnology is expected to under-perform the Guangdong Cellwise. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu GDK Biotechnology is 1.13 times less risky than Guangdong Cellwise. The stock trades about -0.06 of its potential returns per unit of risk. The Guangdong Cellwise Microelectronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,403  in Guangdong Cellwise Microelectronics on October 9, 2024 and sell it today you would earn a total of  1,113  from holding Guangdong Cellwise Microelectronics or generate 32.71% return on investment over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Guangdong Cellwise Microelectr

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.

Guangdong Cellwise

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Cellwise Microelectronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Cellwise 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 Guangdong Cellwise

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

The idea behind Jiangsu GDK Biotechnology and Guangdong Cellwise Microelectronics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.