Correlation Between Jiangsu Yanghe and Hubei Forbon

Can any of the company-specific risk be diversified away by investing in both Jiangsu Yanghe and Hubei Forbon 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 Jiangsu Yanghe and Hubei Forbon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Yanghe Brewery and Hubei Forbon Technology, you can compare the effects of market volatilities on Jiangsu Yanghe and Hubei Forbon 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 Jiangsu Yanghe with a short position of Hubei Forbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Yanghe and Hubei Forbon.

Diversification Opportunities for Jiangsu Yanghe and Hubei Forbon

0.28

Correlation Coefficient

Jiangsu Yanghe  Hubei Forbon

Modest diversification

The 3 months correlation between Jiangsu and Hubei is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yanghe Brewery and Hubei Forbon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Forbon Technology and Jiangsu Yanghe 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 Jiangsu Yanghe Brewery are associated (or correlated) with Hubei Forbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Forbon Technology has no effect on the direction of Jiangsu Yanghe i.e., Jiangsu Yanghe and Hubei Forbon go up and down completely randomly.

Pair Corralation between Jiangsu Yanghe and Hubei Forbon

Assuming the 90 days trading horizon Jiangsu Yanghe Brewery is expected to under-perform the Hubei Forbon. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Yanghe Brewery is 1.88 times less risky than Hubei Forbon. The stock trades about -0.07 of its potential returns per unit of risk. The Hubei Forbon Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Hubei Forbon Technology on October 27, 2024 and sell it today you would lose (3.00) from holding Hubei Forbon Technology or give up 0.36% of portfolio value over 90 days.

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

Jiangsu Yanghe Brewery  vs.  Hubei Forbon Technology

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Yanghe Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hubei Forbon Technology

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Jiangsu Yanghe and Hubei Forbon

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

The idea behind Jiangsu Yanghe Brewery and Hubei Forbon Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.