Correlation Between Gome Telecom and Jinhe Biotechnology

Can any of the company-specific risk be diversified away by investing in both Gome Telecom and Jinhe Biotechnology 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 Gome Telecom and Jinhe Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gome Telecom Equipment and Jinhe Biotechnology Co, you can compare the effects of market volatilities on Gome Telecom and Jinhe Biotechnology 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 Gome Telecom with a short position of Jinhe Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and Jinhe Biotechnology.

Diversification Opportunities for Gome Telecom and Jinhe Biotechnology

0.44

Correlation Coefficient

Gome Telecom  Jinhe Biotechnology

Very weak diversification

The 3 months correlation between Gome and Jinhe is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Jinhe Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhe Biotechnology and Gome Telecom 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 Gome Telecom Equipment are associated (or correlated) with Jinhe Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhe Biotechnology has no effect on the direction of Gome Telecom i.e., Gome Telecom and Jinhe Biotechnology go up and down completely randomly.

Pair Corralation between Gome Telecom and Jinhe Biotechnology

Assuming the 90 days trading horizon Gome Telecom is expected to generate 1.34 times less return on investment than Jinhe Biotechnology. In addition to that, Gome Telecom is 2.07 times more volatile than Jinhe Biotechnology Co. It trades about 0.07 of its total potential returns per unit of risk. Jinhe Biotechnology Co is currently generating about 0.19 per unit of volatility. If you would invest  412.00  in Jinhe Biotechnology Co on September 13, 2024 and sell it today you would earn a total of  61.00  from holding Jinhe Biotechnology Co or generate 14.81% return on investment over 90 days.

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

Gome Telecom Equipment  vs.  Jinhe Biotechnology Co

Gome Telecom Equipment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gome Telecom Equipment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gome Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinhe Biotechnology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhe Biotechnology Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhe Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and Jinhe Biotechnology

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

The idea behind Gome Telecom Equipment and Jinhe Biotechnology 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.