Correlation Between Muyuan Foodstuff and Soyea Technology

Can any of the company-specific risk be diversified away by investing in both Muyuan Foodstuff and Soyea Technology 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 Soyea Technology 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 Soyea Technology Co, you can compare the effects of market volatilities on Muyuan Foodstuff and Soyea Technology 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 Soyea Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muyuan Foodstuff and Soyea Technology.

Diversification Opportunities for Muyuan Foodstuff and Soyea Technology

-0.6

Correlation Coefficient

Muyuan Foodstuff  Soyea Technology

Excellent diversification

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

Pair Corralation between Muyuan Foodstuff and Soyea Technology

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to generate 0.67 times more return on investment than Soyea Technology. However, Muyuan Foodstuff Co is 1.5 times less risky than Soyea Technology. It trades about -0.01 of its potential returns per unit of risk. Soyea Technology Co is currently generating about -0.03 per unit of risk. If you would invest  4,615  in Muyuan Foodstuff Co on October 10, 2024 and sell it today you would lose (847.00) from holding Muyuan Foodstuff Co or give up 18.35% of portfolio value over 90 days.

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

Muyuan Foodstuff Co  vs.  Soyea Technology Co

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 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.

Soyea Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Soyea Technology Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Soyea Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Muyuan Foodstuff and Soyea Technology

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

The idea behind Muyuan Foodstuff Co and Soyea Technology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.