Correlation Between Edible Garden and Jiangsu Expressway

Can any of the company-specific risk be diversified away by investing in both Edible Garden and Jiangsu Expressway 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 Edible Garden and Jiangsu Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edible Garden AG and Jiangsu Expressway Co, you can compare the effects of market volatilities on Edible Garden and Jiangsu Expressway 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 Edible Garden with a short position of Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edible Garden and Jiangsu Expressway.

Diversification Opportunities for Edible Garden and Jiangsu Expressway

0.51

Correlation Coefficient

Edible Garden  Jiangsu Expressway

Very weak diversification

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

Pair Corralation between Edible Garden and Jiangsu Expressway

Given the investment horizon of 90 days Edible Garden AG is expected to generate 3.93 times more return on investment than Jiangsu Expressway. However, Edible Garden is 3.93 times more volatile than Jiangsu Expressway Co. It trades about 0.11 of its potential returns per unit of risk. Jiangsu Expressway Co is currently generating about 0.0 per unit of risk. If you would invest  21.00  in Edible Garden AG on October 6, 2024 and sell it today you would earn a total of  13.00  from holding Edible Garden AG or generate 61.9% return on investment over 90 days.

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

Edible Garden AG  vs.  Jiangsu Expressway Co

Edible Garden AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Expressway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Expressway Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Edible Garden and Jiangsu Expressway

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

The idea behind Edible Garden AG and Jiangsu Expressway 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.