Correlation Between Elite Color and Jiahe Foods

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

By analyzing existing cross correlation between Elite Color Environmental and Jiahe Foods Industry, you can compare the effects of market volatilities on Elite Color and Jiahe 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 Elite Color with a short position of Jiahe Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Jiahe Foods.

Diversification Opportunities for Elite Color and Jiahe Foods

0.72

Correlation Coefficient

Elite Color  Jiahe Foods

Poor diversification

The 3 months correlation between Elite and Jiahe is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Jiahe Foods Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiahe Foods Industry and Elite Color 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 Elite Color Environmental are associated (or correlated) with Jiahe Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiahe Foods Industry has no effect on the direction of Elite Color i.e., Elite Color and Jiahe Foods go up and down completely randomly.

Pair Corralation between Elite Color and Jiahe Foods

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 0.71 times more return on investment than Jiahe Foods. However, Elite Color Environmental is 1.4 times less risky than Jiahe Foods. It trades about 0.03 of its potential returns per unit of risk. Jiahe Foods Industry is currently generating about -0.01 per unit of risk. If you would invest  578.00  in Elite Color Environmental on October 10, 2024 and sell it today you would earn a total of  21.00  from holding Elite Color Environmental or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Elite Color Environmental  vs.  Jiahe Foods Industry

Elite Color Environmental

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Elite Color is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiahe Foods Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Elite Color and Jiahe Foods

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

The idea behind Elite Color Environmental and Jiahe Foods Industry 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.