Correlation Between Shenyang Chemical and Jiahe Foods

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

Diversification Opportunities for Shenyang Chemical and Jiahe Foods

0.68

Correlation Coefficient

Shenyang Chemical  Jiahe Foods

Poor diversification

The 3 months correlation between Shenyang and Jiahe is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Jiahe Foods Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiahe Foods Industry 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 Jiahe Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiahe Foods Industry has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Jiahe Foods go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Jiahe Foods

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 1.15 times more return on investment than Jiahe Foods. However, Shenyang Chemical is 1.15 times more volatile than Jiahe Foods Industry. It trades about -0.19 of its potential returns per unit of risk. Jiahe Foods Industry is currently generating about -0.29 per unit of risk. If you would invest  388.00  in Shenyang Chemical Industry on October 9, 2024 and sell it today you would lose (61.00) from holding Shenyang Chemical Industry or give up 15.72% of portfolio value over 90 days.

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

Shenyang Chemical Industry  vs.  Jiahe Foods Industry

Shenyang Chemical

Risk-Adjusted Performance

3 of 100

Weak

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 February 2025.

Jiahe Foods Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiahe Foods Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiahe Foods 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 Jiahe Foods

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

The idea behind Shenyang Chemical Industry and Jiahe Foods Industry 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.