Correlation Between Changchun and Jiahe Foods

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

By analyzing existing cross correlation between Changchun UP Optotech and Jiahe Foods Industry, you can compare the effects of market volatilities on Changchun 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 Changchun with a short position of Jiahe Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and Jiahe Foods.

Diversification Opportunities for Changchun and Jiahe Foods

0.62

Correlation Coefficient

Changchun  Jiahe Foods

Poor diversification

The 3 months correlation between Changchun and Jiahe is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech 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 Changchun 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 Changchun UP Optotech 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 Changchun i.e., Changchun and Jiahe Foods go up and down completely randomly.

Pair Corralation between Changchun and Jiahe Foods

Assuming the 90 days trading horizon Changchun is expected to generate 9.38 times less return on investment than Jiahe Foods. But when comparing it to its historical volatility, Changchun UP Optotech is 1.69 times less risky than Jiahe Foods. It trades about 0.04 of its potential returns per unit of risk. Jiahe Foods Industry is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,201  in Jiahe Foods Industry on September 17, 2024 and sell it today you would earn a total of  246.00  from holding Jiahe Foods Industry or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Changchun UP Optotech  vs.  Jiahe Foods Industry

Changchun UP Optotech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiahe Foods Industry

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiahe Foods Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiahe Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changchun and Jiahe Foods

The main advantage of trading using opposite Changchun and Jiahe Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changchun 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 Changchun UP Optotech 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 CEOs Directory module to screen CEOs from public companies around the world.