Correlation Between Jiamei Food and Chongqing Landai

Can any of the company-specific risk be diversified away by investing in both Jiamei Food and Chongqing Landai 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 Jiamei Food and Chongqing Landai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiamei Food Packaging and Chongqing Landai Powertrain, you can compare the effects of market volatilities on Jiamei Food and Chongqing Landai 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 Jiamei Food with a short position of Chongqing Landai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiamei Food and Chongqing Landai.

Diversification Opportunities for Jiamei Food and Chongqing Landai

0.84

Correlation Coefficient

Jiamei Food  Chongqing Landai

Very poor diversification

The 3 months correlation between Jiamei and Chongqing is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Jiamei Food Packaging and Chongqing Landai Powertrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Landai Pow and Jiamei Food 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 Jiamei Food Packaging are associated (or correlated) with Chongqing Landai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Landai Pow has no effect on the direction of Jiamei Food i.e., Jiamei Food and Chongqing Landai go up and down completely randomly.

Pair Corralation between Jiamei Food and Chongqing Landai

Assuming the 90 days trading horizon Jiamei Food is expected to generate 3.24 times less return on investment than Chongqing Landai. But when comparing it to its historical volatility, Jiamei Food Packaging is 2.18 times less risky than Chongqing Landai. It trades about 0.17 of its potential returns per unit of risk. Chongqing Landai Powertrain is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Chongqing Landai Powertrain on September 5, 2024 and sell it today you would earn a total of  499.00  from holding Chongqing Landai Powertrain or generate 99.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Jiamei Food Packaging  vs.  Chongqing Landai Powertrain

Jiamei Food Packaging

Risk-Adjusted Performance

13 of 100

Good

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

Chongqing Landai Pow

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Jiamei Food and Chongqing Landai

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

The idea behind Jiamei Food Packaging and Chongqing Landai Powertrain 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.