Correlation Between Jiajia Food and Guangdong Jingyi

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

By analyzing existing cross correlation between Jiajia Food Group and Guangdong Jingyi Metal, you can compare the effects of market volatilities on Jiajia Food and Guangdong Jingyi 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 Jiajia Food with a short position of Guangdong Jingyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiajia Food and Guangdong Jingyi.

Diversification Opportunities for Jiajia Food and Guangdong Jingyi

0.85

Correlation Coefficient

Jiajia Food  Guangdong Jingyi

Very poor diversification

The 3 months correlation between Jiajia and Guangdong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jiajia Food Group and Guangdong Jingyi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jingyi Metal and Jiajia Food 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 Jiajia Food Group are associated (or correlated) with Guangdong Jingyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jingyi Metal has no effect on the direction of Jiajia Food i.e., Jiajia Food and Guangdong Jingyi go up and down completely randomly.

Pair Corralation between Jiajia Food and Guangdong Jingyi

Assuming the 90 days trading horizon Jiajia Food Group is expected to generate 1.07 times more return on investment than Guangdong Jingyi. However, Jiajia Food is 1.07 times more volatile than Guangdong Jingyi Metal. It trades about -0.03 of its potential returns per unit of risk. Guangdong Jingyi Metal is currently generating about -0.21 per unit of risk. If you would invest  462.00  in Jiajia Food Group on October 10, 2024 and sell it today you would lose (15.00) from holding Jiajia Food Group or give up 3.25% of portfolio value over 90 days.

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

Jiajia Food Group  vs.  Guangdong Jingyi Metal

Jiajia Food Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiajia Food Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiajia Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jingyi Metal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiajia Food and Guangdong Jingyi

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

The idea behind Jiajia Food Group and Guangdong Jingyi Metal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.