Correlation Between Sichuan Jinshi and Qingdao Foods

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

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

Diversification Opportunities for Sichuan Jinshi and Qingdao Foods

0.92

Correlation Coefficient

Sichuan Jinshi  Qingdao Foods

Almost no diversification

The 3 months correlation between Sichuan and Qingdao is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Qingdao Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Foods and Sichuan Jinshi 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 Sichuan Jinshi Technology are associated (or correlated) with Qingdao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Foods has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and Qingdao Foods go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Qingdao Foods

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to under-perform the Qingdao Foods. In addition to that, Sichuan Jinshi is 1.16 times more volatile than Qingdao Foods Co. It trades about -0.01 of its total potential returns per unit of risk. Qingdao Foods Co is currently generating about 0.01 per unit of volatility. If you would invest  1,487  in Qingdao Foods Co on September 26, 2024 and sell it today you would lose (84.00) from holding Qingdao Foods Co or give up 5.65% of portfolio value over 90 days.

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

Sichuan Jinshi Technology  vs.  Qingdao Foods Co

Sichuan Jinshi Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Qingdao Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Jinshi and Qingdao Foods

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

The idea behind Sichuan Jinshi Technology and Qingdao 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.