Correlation Between Muyuan Foodstuff and Guangdong Jingyi

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

Diversification Opportunities for Muyuan Foodstuff and Guangdong Jingyi

0.69

Correlation Coefficient

Muyuan Foodstuff  Guangdong Jingyi

Poor diversification

The 3 months correlation between Muyuan and Guangdong is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Muyuan Foodstuff Co and Guangdong Jingyi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jingyi Metal 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 Guangdong Jingyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jingyi Metal has no effect on the direction of Muyuan Foodstuff i.e., Muyuan Foodstuff and Guangdong Jingyi go up and down completely randomly.

Pair Corralation between Muyuan Foodstuff and Guangdong Jingyi

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to under-perform the Guangdong Jingyi. But the stock apears to be less risky and, when comparing its historical volatility, Muyuan Foodstuff Co is 1.18 times less risky than Guangdong Jingyi. The stock trades about -0.23 of its potential returns per unit of risk. The Guangdong Jingyi Metal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  727.00  in Guangdong Jingyi Metal on September 5, 2024 and sell it today you would earn a total of  23.00  from holding Guangdong Jingyi Metal or generate 3.16% return on investment over 90 days.

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

Muyuan Foodstuff Co  vs.  Guangdong Jingyi Metal

Muyuan Foodstuff

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Muyuan Foodstuff Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Muyuan Foodstuff may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guangdong Jingyi Metal

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Muyuan Foodstuff and Guangdong Jingyi

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

The idea behind Muyuan Foodstuff Co and Guangdong Jingyi Metal 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.