Correlation Between Shenzhen RoadRover and HaiXin Foods

Can any of the company-specific risk be diversified away by investing in both Shenzhen RoadRover and HaiXin Foods 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 Shenzhen RoadRover and HaiXin Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen RoadRover Technology and HaiXin Foods Co, you can compare the effects of market volatilities on Shenzhen RoadRover and HaiXin Foods 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 Shenzhen RoadRover with a short position of HaiXin Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen RoadRover and HaiXin Foods.

Diversification Opportunities for Shenzhen RoadRover and HaiXin Foods

0.27

Correlation Coefficient

Shenzhen RoadRover  HaiXin Foods

Modest diversification

The 3 months correlation between Shenzhen and HaiXin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen RoadRover Technology and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Shenzhen RoadRover 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 Shenzhen RoadRover Technology are associated (or correlated) with HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of Shenzhen RoadRover i.e., Shenzhen RoadRover and HaiXin Foods go up and down completely randomly.

Pair Corralation between Shenzhen RoadRover and HaiXin Foods

Assuming the 90 days trading horizon Shenzhen RoadRover Technology is expected to under-perform the HaiXin Foods. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen RoadRover Technology is 2.07 times less risky than HaiXin Foods. The stock trades about -0.21 of its potential returns per unit of risk. The HaiXin Foods Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  417.00  in HaiXin Foods Co on September 25, 2024 and sell it today you would earn a total of  41.00  from holding HaiXin Foods Co or generate 9.83% return on investment over 90 days.

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

Shenzhen RoadRover Technology  vs.  HaiXin Foods Co

Shenzhen RoadRover

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Shenzhen RoadRover Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen RoadRover is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HaiXin Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 11 (%) 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.

Pair Trading with Shenzhen RoadRover and HaiXin Foods

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

The idea behind Shenzhen RoadRover Technology and HaiXin Foods 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.