Correlation Between Jiajia Food and Changchun

Can any of the company-specific risk be diversified away by investing in both Jiajia Food and Changchun 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 Changchun 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 Changchun UP Optotech, you can compare the effects of market volatilities on Jiajia Food and Changchun 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 Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiajia Food and Changchun.

Diversification Opportunities for Jiajia Food and Changchun

0.04

Correlation Coefficient

Jiajia Food  Changchun

Significant diversification

The 3 months correlation between Jiajia and Changchun is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jiajia Food Group and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech 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 Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Jiajia Food i.e., Jiajia Food and Changchun go up and down completely randomly.

Pair Corralation between Jiajia Food and Changchun

Assuming the 90 days trading horizon Jiajia Food is expected to generate 4.91 times less return on investment than Changchun. But when comparing it to its historical volatility, Jiajia Food Group is 1.23 times less risky than Changchun. It trades about 0.04 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,549  in Changchun UP Optotech on December 5, 2024 and sell it today you would earn a total of  501.00  from holding Changchun UP Optotech or generate 14.12% return on investment over 90 days.

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

Jiajia Food Group  vs.  Changchun UP Optotech

Jiajia Food Group

Risk-Adjusted Performance

Very Weak

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

Changchun UP Optotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changchun UP Optotech 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.

Pair Trading with Jiajia Food and Changchun

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

The idea behind Jiajia Food Group and Changchun UP Optotech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.