Correlation Between Jiangsu GDK and Guangzhou Ruoyuchen

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

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

Diversification Opportunities for Jiangsu GDK and Guangzhou Ruoyuchen

0.83

Correlation Coefficient

Jiangsu GDK  Guangzhou Ruoyuchen

Very poor diversification

The 3 months correlation between Jiangsu and Guangzhou is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu GDK Biotechnology and Guangzhou Ruoyuchen Informatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Ruoyuchen and Jiangsu GDK 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 GDK Biotechnology are associated (or correlated) with Guangzhou Ruoyuchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Ruoyuchen has no effect on the direction of Jiangsu GDK i.e., Jiangsu GDK and Guangzhou Ruoyuchen go up and down completely randomly.

Pair Corralation between Jiangsu GDK and Guangzhou Ruoyuchen

Assuming the 90 days trading horizon Jiangsu GDK is expected to generate 1.74 times less return on investment than Guangzhou Ruoyuchen. In addition to that, Jiangsu GDK is 1.08 times more volatile than Guangzhou Ruoyuchen Information. It trades about 0.17 of its total potential returns per unit of risk. Guangzhou Ruoyuchen Information is currently generating about 0.31 per unit of volatility. If you would invest  1,165  in Guangzhou Ruoyuchen Information on September 21, 2024 and sell it today you would earn a total of  1,325  from holding Guangzhou Ruoyuchen Information or generate 113.73% return on investment over 90 days.

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

Jiangsu GDK Biotechnology  vs.  Guangzhou Ruoyuchen Informatio

Jiangsu GDK Biotechnology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu GDK Biotechnology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu GDK sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Ruoyuchen

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Ruoyuchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu GDK and Guangzhou Ruoyuchen

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

The idea behind Jiangsu GDK Biotechnology and Guangzhou Ruoyuchen Information 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.