Correlation Between Tibet Huayu and Jiangsu GDK

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

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

Diversification Opportunities for Tibet Huayu and Jiangsu GDK

0.81

Correlation Coefficient

Tibet Huayu  Jiangsu GDK

Very poor diversification

The 3 months correlation between Tibet and Jiangsu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Jiangsu GDK Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu GDK Biotechnology and Tibet Huayu 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 Tibet Huayu Mining are associated (or correlated) with Jiangsu GDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu GDK Biotechnology has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Tibet Huayu and Jiangsu GDK

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 0.93 times more return on investment than Jiangsu GDK. However, Tibet Huayu Mining is 1.08 times less risky than Jiangsu GDK. It trades about 0.04 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.03 per unit of risk. If you would invest  909.00  in Tibet Huayu Mining on September 28, 2024 and sell it today you would earn a total of  416.00  from holding Tibet Huayu Mining or generate 45.76% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Jiangsu GDK Biotechnology

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tibet Huayu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, Jiangsu GDK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tibet Huayu and Jiangsu GDK

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

The idea behind Tibet Huayu Mining and Jiangsu GDK Biotechnology 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.