Correlation Between Muyuan Foodstuff and Nanjing OLO

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

Diversification Opportunities for Muyuan Foodstuff and Nanjing OLO

0.19

Correlation Coefficient

Muyuan Foodstuff  Nanjing OLO

Average diversification

The 3 months correlation between Muyuan and Nanjing is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Muyuan Foodstuff Co and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home 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 Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Muyuan Foodstuff i.e., Muyuan Foodstuff and Nanjing OLO go up and down completely randomly.

Pair Corralation between Muyuan Foodstuff and Nanjing OLO

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to generate 0.29 times more return on investment than Nanjing OLO. However, Muyuan Foodstuff Co is 3.42 times less risky than Nanjing OLO. It trades about -0.21 of its potential returns per unit of risk. Nanjing OLO Home is currently generating about -0.08 per unit of risk. If you would invest  4,099  in Muyuan Foodstuff Co on September 28, 2024 and sell it today you would lose (207.00) from holding Muyuan Foodstuff Co or give up 5.05% of portfolio value over 90 days.

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

Muyuan Foodstuff Co  vs.  Nanjing OLO Home

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nanjing OLO Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nanjing OLO Home 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 Nanjing OLO

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

The idea behind Muyuan Foodstuff Co and Nanjing OLO Home 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.