Correlation Between Muyuan Foodstuff and Hainan Pearl

Can any of the company-specific risk be diversified away by investing in both Muyuan Foodstuff and Hainan Pearl 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 Muyuan Foodstuff and Hainan Pearl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Muyuan Foodstuff Co and Hainan Pearl River, you can compare the effects of market volatilities on Muyuan Foodstuff and Hainan Pearl 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 Muyuan Foodstuff with a short position of Hainan Pearl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muyuan Foodstuff and Hainan Pearl.

Diversification Opportunities for Muyuan Foodstuff and Hainan Pearl

0.5

Correlation Coefficient

Muyuan Foodstuff  Hainan Pearl

Very weak diversification

The 3 months correlation between Muyuan and Hainan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Muyuan Foodstuff Co and Hainan Pearl River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Pearl River and Muyuan Foodstuff 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 Muyuan Foodstuff Co are associated (or correlated) with Hainan Pearl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Pearl River has no effect on the direction of Muyuan Foodstuff i.e., Muyuan Foodstuff and Hainan Pearl go up and down completely randomly.

Pair Corralation between Muyuan Foodstuff and Hainan Pearl

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to under-perform the Hainan Pearl. But the stock apears to be less risky and, when comparing its historical volatility, Muyuan Foodstuff Co is 1.86 times less risky than Hainan Pearl. The stock trades about -0.18 of its potential returns per unit of risk. The Hainan Pearl River is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  665.00  in Hainan Pearl River on October 26, 2024 and sell it today you would lose (81.00) from holding Hainan Pearl River or give up 12.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Muyuan Foodstuff Co  vs.  Hainan Pearl River

Muyuan Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muyuan Foodstuff Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hainan Pearl River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan Pearl River 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 Muyuan Foodstuff and Hainan Pearl

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

The idea behind Muyuan Foodstuff Co and Hainan Pearl River 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.