Correlation Between Jinzai Food and Western Securities

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

By analyzing existing cross correlation between Jinzai Food Group and Western Securities Co, you can compare the effects of market volatilities on Jinzai Food and Western Securities 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 Jinzai Food with a short position of Western Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinzai Food and Western Securities.

Diversification Opportunities for Jinzai Food and Western Securities

0.05

Correlation Coefficient

Jinzai Food  Western Securities

Significant diversification

The 3 months correlation between Jinzai and Western is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jinzai Food Group and Western Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Securities and Jinzai 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 Jinzai Food Group are associated (or correlated) with Western Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Securities has no effect on the direction of Jinzai Food i.e., Jinzai Food and Western Securities go up and down completely randomly.

Pair Corralation between Jinzai Food and Western Securities

Assuming the 90 days trading horizon Jinzai Food Group is expected to under-perform the Western Securities. But the stock apears to be less risky and, when comparing its historical volatility, Jinzai Food Group is 1.0 times less risky than Western Securities. The stock trades about -0.04 of its potential returns per unit of risk. The Western Securities Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  818.00  in Western Securities Co on October 23, 2024 and sell it today you would lose (41.00) from holding Western Securities Co or give up 5.01% of portfolio value over 90 days.

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

Jinzai Food Group  vs.  Western Securities Co

Jinzai Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinzai Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Western Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jinzai Food and Western Securities

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

The idea behind Jinzai Food Group and Western Securities 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.