Correlation Between Jiamei Food and Eastroc Beverage

Can any of the company-specific risk be diversified away by investing in both Jiamei Food and Eastroc Beverage 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 Eastroc Beverage 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 Eastroc Beverage Group, you can compare the effects of market volatilities on Jiamei Food and Eastroc Beverage 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 Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiamei Food and Eastroc Beverage.

Diversification Opportunities for Jiamei Food and Eastroc Beverage

0.86

Correlation Coefficient

Jiamei Food  Eastroc Beverage

Very poor diversification

The 3 months correlation between Jiamei and Eastroc is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jiamei Food Packaging and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage 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 Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Jiamei Food i.e., Jiamei Food and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Jiamei Food and Eastroc Beverage

Assuming the 90 days trading horizon Jiamei Food Packaging is expected to under-perform the Eastroc Beverage. In addition to that, Jiamei Food is 1.01 times more volatile than Eastroc Beverage Group. It trades about -0.01 of its total potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.08 per unit of volatility. If you would invest  13,071  in Eastroc Beverage Group on September 19, 2024 and sell it today you would earn a total of  12,129  from holding Eastroc Beverage Group or generate 92.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Jiamei Food Packaging  vs.  Eastroc Beverage Group

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.

Eastroc Beverage

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiamei Food and Eastroc Beverage

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

The idea behind Jiamei Food Packaging and Eastroc Beverage Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.