Correlation Between Jiangsu Expressway and Bt Brands

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

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

Diversification Opportunities for Jiangsu Expressway and Bt Brands

0.04

Correlation Coefficient

Jiangsu Expressway  Bt Brands

Significant diversification

The 3 months correlation between Jiangsu and BTBD is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Expressway and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Jiangsu Expressway 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 Expressway are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Jiangsu Expressway i.e., Jiangsu Expressway and Bt Brands go up and down completely randomly.

Pair Corralation between Jiangsu Expressway and Bt Brands

Assuming the 90 days horizon Jiangsu Expressway is expected to generate 1.88 times less return on investment than Bt Brands. But when comparing it to its historical volatility, Jiangsu Expressway is 1.95 times less risky than Bt Brands. It trades about 0.05 of its potential returns per unit of risk. Bt Brands is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Bt Brands on October 10, 2024 and sell it today you would earn a total of  12.00  from holding Bt Brands or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Jiangsu Expressway  vs.  Bt Brands

Jiangsu Expressway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Jiangsu Expressway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bt Brands

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Bt Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Expressway and Bt Brands

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

The idea behind Jiangsu Expressway and Bt Brands 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.