Correlation Between Kingdee International and Jazz Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Kingdee International and Jazz Pharmaceuticals 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 Kingdee International and Jazz Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingdee International Software and Jazz Pharmaceuticals plc, you can compare the effects of market volatilities on Kingdee International and Jazz Pharmaceuticals 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 Kingdee International with a short position of Jazz Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Jazz Pharmaceuticals.

Diversification Opportunities for Kingdee International and Jazz Pharmaceuticals

0.32

Correlation Coefficient

Kingdee International  Jazz Pharmaceuticals

Weak diversification

The 3 months correlation between Kingdee and Jazz is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Jazz Pharmaceuticals plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals plc and Kingdee International 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 Kingdee International Software are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals plc has no effect on the direction of Kingdee International i.e., Kingdee International and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Kingdee International and Jazz Pharmaceuticals

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the Jazz Pharmaceuticals. In addition to that, Kingdee International is 2.28 times more volatile than Jazz Pharmaceuticals plc. It trades about -0.01 of its total potential returns per unit of risk. Jazz Pharmaceuticals plc is currently generating about -0.02 per unit of volatility. If you would invest  14,350  in Jazz Pharmaceuticals plc on October 5, 2024 and sell it today you would lose (2,695) from holding Jazz Pharmaceuticals plc or give up 18.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Kingdee International Software  vs.  Jazz Pharmaceuticals plc

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Jazz Pharmaceuticals plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Jazz Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingdee International and Jazz Pharmaceuticals

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

The idea behind Kingdee International Software and Jazz Pharmaceuticals plc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.