Correlation Between HaiXin Foods and Shenzhen RoadRover

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

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

Diversification Opportunities for HaiXin Foods and Shenzhen RoadRover

0.32

Correlation Coefficient

HaiXin Foods  Shenzhen RoadRover

Weak diversification

The 3 months correlation between HaiXin and Shenzhen is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding HaiXin Foods Co and Shenzhen RoadRover Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen RoadRover and HaiXin Foods 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 HaiXin Foods Co are associated (or correlated) with Shenzhen RoadRover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen RoadRover has no effect on the direction of HaiXin Foods i.e., HaiXin Foods and Shenzhen RoadRover go up and down completely randomly.

Pair Corralation between HaiXin Foods and Shenzhen RoadRover

Assuming the 90 days trading horizon HaiXin Foods Co is expected to under-perform the Shenzhen RoadRover. But the stock apears to be less risky and, when comparing its historical volatility, HaiXin Foods Co is 1.13 times less risky than Shenzhen RoadRover. The stock trades about -0.01 of its potential returns per unit of risk. The Shenzhen RoadRover Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,590  in Shenzhen RoadRover Technology on September 21, 2024 and sell it today you would lose (33.00) from holding Shenzhen RoadRover Technology or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

HaiXin Foods Co  vs.  Shenzhen RoadRover Technology

HaiXin Foods

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen RoadRover

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen RoadRover Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen RoadRover sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HaiXin Foods and Shenzhen RoadRover

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

The idea behind HaiXin Foods Co and Shenzhen RoadRover Technology 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.