Correlation Between Jiajia Food and China Everbright

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

Diversification Opportunities for Jiajia Food and China Everbright

0.05

Correlation Coefficient

Jiajia Food  China Everbright

Significant diversification

The 3 months correlation between Jiajia and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jiajia Food Group and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank 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 China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Jiajia Food i.e., Jiajia Food and China Everbright go up and down completely randomly.

Pair Corralation between Jiajia Food and China Everbright

Assuming the 90 days trading horizon Jiajia Food Group is expected to generate 1.73 times more return on investment than China Everbright. However, Jiajia Food is 1.73 times more volatile than China Everbright Bank. It trades about 0.01 of its potential returns per unit of risk. China Everbright Bank is currently generating about 0.02 per unit of risk. If you would invest  500.00  in Jiajia Food Group on December 24, 2024 and sell it today you would earn a total of  1.00  from holding Jiajia Food Group or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Jiajia Food Group  vs.  China Everbright Bank

Jiajia Food Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiajia Food Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

China Everbright Bank

Risk-Adjusted Performance

Weak

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

Pair Trading with Jiajia Food and China Everbright

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

The idea behind Jiajia Food Group and China Everbright Bank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.