Correlation Between Xiwang Foodstuffs and Shijiazhuang Tonhe

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

Diversification Opportunities for Xiwang Foodstuffs and Shijiazhuang Tonhe

0.5

Correlation Coefficient

Xiwang Foodstuffs  Shijiazhuang Tonhe

Very weak diversification

The 3 months correlation between Xiwang and Shijiazhuang is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xiwang Foodstuffs Co and Shijiazhuang Tonhe Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shijiazhuang Tonhe 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 Shijiazhuang Tonhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shijiazhuang Tonhe has no effect on the direction of Xiwang Foodstuffs i.e., Xiwang Foodstuffs and Shijiazhuang Tonhe go up and down completely randomly.

Pair Corralation between Xiwang Foodstuffs and Shijiazhuang Tonhe

Assuming the 90 days trading horizon Xiwang Foodstuffs Co is expected to generate 1.56 times more return on investment than Shijiazhuang Tonhe. However, Xiwang Foodstuffs is 1.56 times more volatile than Shijiazhuang Tonhe Electronics. It trades about -0.03 of its potential returns per unit of risk. Shijiazhuang Tonhe Electronics is currently generating about -0.05 per unit of risk. If you would invest  386.00  in Xiwang Foodstuffs Co on October 6, 2024 and sell it today you would lose (42.00) from holding Xiwang Foodstuffs Co or give up 10.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Xiwang Foodstuffs Co  vs.  Shijiazhuang Tonhe Electronics

Xiwang Foodstuffs

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiwang Foodstuffs Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiwang Foodstuffs sustained solid returns over the last few months and may actually be approaching a breakup point.

Shijiazhuang Tonhe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shijiazhuang Tonhe Electronics 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xiwang Foodstuffs and Shijiazhuang Tonhe

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

The idea behind Xiwang Foodstuffs Co and Shijiazhuang Tonhe Electronics 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 Anywhere module to track or share privately all of your investments from the convenience of any device.