Correlation Between Xiwang Foodstuffs and Muyuan Foodstuff

Can any of the company-specific risk be diversified away by investing in both Xiwang Foodstuffs and Muyuan Foodstuff 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 Muyuan Foodstuff 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 Muyuan Foodstuff Co, you can compare the effects of market volatilities on Xiwang Foodstuffs and Muyuan Foodstuff 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 Muyuan Foodstuff. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiwang Foodstuffs and Muyuan Foodstuff.

Diversification Opportunities for Xiwang Foodstuffs and Muyuan Foodstuff

0.63

Correlation Coefficient

Xiwang Foodstuffs  Muyuan Foodstuff

Poor diversification

The 3 months correlation between Xiwang and Muyuan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xiwang Foodstuffs Co and Muyuan Foodstuff Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muyuan Foodstuff 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 Muyuan Foodstuff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muyuan Foodstuff has no effect on the direction of Xiwang Foodstuffs i.e., Xiwang Foodstuffs and Muyuan Foodstuff go up and down completely randomly.

Pair Corralation between Xiwang Foodstuffs and Muyuan Foodstuff

Assuming the 90 days trading horizon Xiwang Foodstuffs Co is expected to under-perform the Muyuan Foodstuff. In addition to that, Xiwang Foodstuffs is 2.1 times more volatile than Muyuan Foodstuff Co. It trades about -0.16 of its total potential returns per unit of risk. Muyuan Foodstuff Co is currently generating about 0.0 per unit of volatility. If you would invest  3,850  in Muyuan Foodstuff Co on December 24, 2024 and sell it today you would lose (25.00) from holding Muyuan Foodstuff Co or give up 0.65% of portfolio value over 90 days.

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

Xiwang Foodstuffs Co  vs.  Muyuan Foodstuff Co

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.

Muyuan Foodstuff

Risk-Adjusted Performance

Very Weak

Over the last 90 days Muyuan Foodstuff Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Muyuan Foodstuff is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiwang Foodstuffs and Muyuan Foodstuff

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

The idea behind Xiwang Foodstuffs Co and Muyuan Foodstuff 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.