Correlation Between Metro Investment and Jiangsu GDK

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Can any of the company-specific risk be diversified away by investing in both Metro Investment 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 Metro Investment and Jiangsu GDK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Investment Development and Jiangsu GDK Biotechnology, you can compare the effects of market volatilities on Metro Investment 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 Metro Investment with a short position of Jiangsu GDK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Investment and Jiangsu GDK.

Diversification Opportunities for Metro Investment and Jiangsu GDK

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Metro and Jiangsu is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development 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 Metro Investment 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 Metro Investment Development 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 Metro Investment i.e., Metro Investment and Jiangsu GDK go up and down completely randomly.

Pair Corralation between Metro Investment and Jiangsu GDK

Assuming the 90 days trading horizon Metro Investment Development is expected to generate 0.83 times more return on investment than Jiangsu GDK. However, Metro Investment Development is 1.21 times less risky than Jiangsu GDK. It trades about 0.07 of its potential returns per unit of risk. Jiangsu GDK Biotechnology is currently generating about -0.02 per unit of risk. If you would invest  381.00  in Metro Investment Development on December 1, 2024 and sell it today you would earn a total of  8.00  from holding Metro Investment Development or generate 2.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Metro Investment Development  vs.  Jiangsu GDK Biotechnology

 Performance 
       Timeline  
Metro Investment Dev 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Jiangsu GDK Biotechnology 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Jiangsu GDK Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Metro Investment and Jiangsu GDK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metro Investment and Jiangsu GDK

The main advantage of trading using opposite Metro Investment and Jiangsu GDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Investment 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.
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The idea behind Metro Investment Development 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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Check out your portfolio center.
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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