Correlation Between Huasi Agricultural and Zhejiang Orient

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

By analyzing existing cross correlation between Huasi Agricultural Development and Zhejiang Orient Gene, you can compare the effects of market volatilities on Huasi Agricultural and Zhejiang Orient 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 Huasi Agricultural with a short position of Zhejiang Orient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huasi Agricultural and Zhejiang Orient.

Diversification Opportunities for Huasi Agricultural and Zhejiang Orient

0.01

Correlation Coefficient

Huasi Agricultural  Zhejiang Orient

Significant diversification

The 3 months correlation between Huasi and Zhejiang is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Zhejiang Orient Gene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Orient Gene and Huasi Agricultural 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 Huasi Agricultural Development are associated (or correlated) with Zhejiang Orient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Orient Gene has no effect on the direction of Huasi Agricultural i.e., Huasi Agricultural and Zhejiang Orient go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Zhejiang Orient

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to generate 1.18 times more return on investment than Zhejiang Orient. However, Huasi Agricultural is 1.18 times more volatile than Zhejiang Orient Gene. It trades about -0.01 of its potential returns per unit of risk. Zhejiang Orient Gene is currently generating about -0.05 per unit of risk. If you would invest  534.00  in Huasi Agricultural Development on October 23, 2024 and sell it today you would lose (142.00) from holding Huasi Agricultural Development or give up 26.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Huasi Agricultural Development  vs.  Zhejiang Orient Gene

Huasi Agricultural

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhejiang Orient Gene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Orient Gene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Orient is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huasi Agricultural and Zhejiang Orient

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

The idea behind Huasi Agricultural Development and Zhejiang Orient Gene 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.