Correlation Between Jinzai Food and Sichuan Teway

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

Diversification Opportunities for Jinzai Food and Sichuan Teway

0.67

Correlation Coefficient

Jinzai Food  Sichuan Teway

Poor diversification

The 3 months correlation between Jinzai and Sichuan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Jinzai Food Group and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food 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 Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of Jinzai Food i.e., Jinzai Food and Sichuan Teway go up and down completely randomly.

Pair Corralation between Jinzai Food and Sichuan Teway

Assuming the 90 days trading horizon Jinzai Food Group is expected to generate 1.44 times more return on investment than Sichuan Teway. However, Jinzai Food is 1.44 times more volatile than Sichuan Teway Food. It trades about -0.06 of its potential returns per unit of risk. Sichuan Teway Food is currently generating about -0.13 per unit of risk. If you would invest  1,312  in Jinzai Food Group on December 10, 2024 and sell it today you would lose (132.00) from holding Jinzai Food Group or give up 10.06% of portfolio value over 90 days.

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

Jinzai Food Group  vs.  Sichuan Teway Food

Jinzai Food Group

Risk-Adjusted Performance

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.

Sichuan Teway Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Teway Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jinzai Food and Sichuan Teway

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

The idea behind Jinzai Food Group and Sichuan Teway Food 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.