Correlation Between Qingdao Foods and Juewei Food

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

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

Diversification Opportunities for Qingdao Foods and Juewei Food

0.78

Correlation Coefficient

Qingdao Foods  Juewei Food

Poor diversification

The 3 months correlation between Qingdao and Juewei is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and Qingdao Foods 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 Qingdao Foods Co 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 Qingdao Foods i.e., Qingdao Foods and Juewei Food go up and down completely randomly.

Pair Corralation between Qingdao Foods and Juewei Food

Assuming the 90 days trading horizon Qingdao Foods Co is expected to generate 0.84 times more return on investment than Juewei Food. However, Qingdao Foods Co is 1.19 times less risky than Juewei Food. It trades about -0.49 of its potential returns per unit of risk. Juewei Food Co is currently generating about -0.64 per unit of risk. If you would invest  1,679  in Qingdao Foods Co on October 13, 2024 and sell it today you would lose (398.00) from holding Qingdao Foods Co or give up 23.7% of portfolio value over 90 days.

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

Qingdao Foods Co  vs.  Juewei Food Co

Qingdao Foods

Risk-Adjusted Performance

3 of 100

Insignificant

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

Juewei Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Juewei Food Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Qingdao Foods and Juewei Food

The main advantage of trading using opposite Qingdao Foods and Juewei Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qingdao Foods 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 Qingdao Foods Co 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.