Correlation Between HaiXin Foods and China Asset

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

Diversification Opportunities for HaiXin Foods and China Asset

0.6

Correlation Coefficient

HaiXin Foods  China Asset

Poor diversification

The 3 months correlation between HaiXin and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HaiXin Foods Co and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management 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 China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of HaiXin Foods i.e., HaiXin Foods and China Asset go up and down completely randomly.

Pair Corralation between HaiXin Foods and China Asset

Assuming the 90 days trading horizon HaiXin Foods Co is expected to under-perform the China Asset. In addition to that, HaiXin Foods is 4.67 times more volatile than China Asset Management. It trades about -0.04 of its total potential returns per unit of risk. China Asset Management is currently generating about 0.46 per unit of volatility. If you would invest  317.00  in China Asset Management on October 3, 2024 and sell it today you would earn a total of  42.00  from holding China Asset Management or generate 13.25% return on investment over 90 days.

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

HaiXin Foods Co  vs.  China Asset Management

HaiXin Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 4 (%) 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.

China Asset Management

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HaiXin Foods and China Asset

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

The idea behind HaiXin Foods Co and China Asset Management 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.