Correlation Between Xiwang Foodstuffs and Huasi Agricultural

Can any of the company-specific risk be diversified away by investing in both Xiwang Foodstuffs and Huasi Agricultural 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 Xiwang Foodstuffs and Huasi Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiwang Foodstuffs Co and Huasi Agricultural Development, you can compare the effects of market volatilities on Xiwang Foodstuffs and Huasi Agricultural 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 Xiwang Foodstuffs with a short position of Huasi Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiwang Foodstuffs and Huasi Agricultural.

Diversification Opportunities for Xiwang Foodstuffs and Huasi Agricultural

-0.53

Correlation Coefficient

Xiwang Foodstuffs  Huasi Agricultural

Excellent diversification

The 3 months correlation between Xiwang and Huasi is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Xiwang Foodstuffs Co and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural and Xiwang Foodstuffs 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 Xiwang Foodstuffs Co are associated (or correlated) with Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Xiwang Foodstuffs i.e., Xiwang Foodstuffs and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Xiwang Foodstuffs and Huasi Agricultural

Assuming the 90 days trading horizon Xiwang Foodstuffs Co is expected to under-perform the Huasi Agricultural. In addition to that, Xiwang Foodstuffs is 1.24 times more volatile than Huasi Agricultural Development. It trades about -0.14 of its total potential returns per unit of risk. Huasi Agricultural Development is currently generating about 0.09 per unit of volatility. If you would invest  414.00  in Huasi Agricultural Development on December 24, 2024 and sell it today you would earn a total of  44.00  from holding Huasi Agricultural Development or generate 10.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Xiwang Foodstuffs Co  vs.  Huasi Agricultural Development

Xiwang Foodstuffs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiwang Foodstuffs Co 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.

Huasi Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiwang Foodstuffs and Huasi Agricultural

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

The idea behind Xiwang Foodstuffs Co and Huasi Agricultural Development 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 Global Correlations module to find global opportunities by holding instruments from different markets.