Correlation Between Shenyang Chemical and Juewei Food

Can any of the company-specific risk be diversified away by investing in both Shenyang Chemical and Juewei Food 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 Shenyang Chemical and Juewei Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenyang Chemical Industry and Juewei Food Co, you can compare the effects of market volatilities on Shenyang Chemical and Juewei Food 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 Shenyang Chemical with a short position of Juewei Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and Juewei Food.

Diversification Opportunities for Shenyang Chemical and Juewei Food

0.87

Correlation Coefficient

Shenyang Chemical  Juewei Food

Very poor diversification

The 3 months correlation between Shenyang and Juewei is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and Shenyang Chemical 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 Shenyang Chemical Industry are associated (or correlated) with Juewei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juewei Food has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Juewei Food go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Juewei Food

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 0.96 times more return on investment than Juewei Food. However, Shenyang Chemical Industry is 1.04 times less risky than Juewei Food. It trades about -0.07 of its potential returns per unit of risk. Juewei Food Co is currently generating about -0.13 per unit of risk. If you would invest  373.00  in Shenyang Chemical Industry on September 29, 2024 and sell it today you would lose (26.00) from holding Shenyang Chemical Industry or give up 6.97% of portfolio value over 90 days.

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

Shenyang Chemical Industry  vs.  Juewei Food Co

Shenyang Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Juewei Food

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Juewei Food Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Juewei Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenyang Chemical and Juewei Food

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

The idea behind Shenyang Chemical Industry and Juewei Food 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.