Correlation Between Shandong Longquan and HaiXin Foods

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

By analyzing existing cross correlation between Shandong Longquan Pipeline and HaiXin Foods Co, you can compare the effects of market volatilities on Shandong Longquan and HaiXin 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 Shandong Longquan with a short position of HaiXin Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Longquan and HaiXin Foods.

Diversification Opportunities for Shandong Longquan and HaiXin Foods

0.38

Correlation Coefficient

Shandong Longquan  HaiXin Foods

Weak diversification

The 3 months correlation between Shandong and HaiXin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Shandong Longquan 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 Shandong Longquan Pipeline are associated (or correlated) with HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and HaiXin Foods go up and down completely randomly.

Pair Corralation between Shandong Longquan and HaiXin Foods

Assuming the 90 days trading horizon Shandong Longquan Pipeline is expected to generate 0.58 times more return on investment than HaiXin Foods. However, Shandong Longquan Pipeline is 1.74 times less risky than HaiXin Foods. It trades about -0.01 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about -0.05 per unit of risk. If you would invest  456.00  in Shandong Longquan Pipeline on December 30, 2024 and sell it today you would lose (6.00) from holding Shandong Longquan Pipeline or give up 1.32% of portfolio value over 90 days.

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

Shandong Longquan Pipeline  vs.  HaiXin Foods Co

Shandong Longquan

Risk-Adjusted Performance

Very Weak

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

HaiXin Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days HaiXin Foods Co 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 Shandong Longquan and HaiXin Foods

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

The idea behind Shandong Longquan Pipeline and HaiXin Foods Co 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.