Correlation Between Xiwang Foodstuffs and Shanghai Ziyan

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

Diversification Opportunities for Xiwang Foodstuffs and Shanghai Ziyan

0.44

Correlation Coefficient

Xiwang Foodstuffs  Shanghai Ziyan

Very weak diversification

The 3 months correlation between Xiwang and Shanghai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Xiwang Foodstuffs Co and Shanghai Ziyan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Ziyan Foods 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 Shanghai Ziyan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Ziyan Foods has no effect on the direction of Xiwang Foodstuffs i.e., Xiwang Foodstuffs and Shanghai Ziyan go up and down completely randomly.

Pair Corralation between Xiwang Foodstuffs and Shanghai Ziyan

Assuming the 90 days trading horizon Xiwang Foodstuffs Co is expected to generate 1.39 times more return on investment than Shanghai Ziyan. However, Xiwang Foodstuffs is 1.39 times more volatile than Shanghai Ziyan Foods. It trades about 0.09 of its potential returns per unit of risk. Shanghai Ziyan Foods is currently generating about 0.02 per unit of risk. If you would invest  282.00  in Xiwang Foodstuffs Co on October 9, 2024 and sell it today you would earn a total of  61.00  from holding Xiwang Foodstuffs Co or generate 21.63% return on investment over 90 days.

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

Xiwang Foodstuffs Co  vs.  Shanghai Ziyan Foods

Xiwang Foodstuffs

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiwang Foodstuffs Co are ranked lower than 6 (%) 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.

Shanghai Ziyan Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Ziyan Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Ziyan 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 Shanghai Ziyan

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

The idea behind Xiwang Foodstuffs Co and Shanghai Ziyan Foods 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.