Correlation Between Gifore Agricultural and Hubei Xingfa

Can any of the company-specific risk be diversified away by investing in both Gifore Agricultural and Hubei Xingfa 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 Gifore Agricultural and Hubei Xingfa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gifore Agricultural Machinery and Hubei Xingfa Chemicals, you can compare the effects of market volatilities on Gifore Agricultural and Hubei Xingfa 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 Gifore Agricultural with a short position of Hubei Xingfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gifore Agricultural and Hubei Xingfa.

Diversification Opportunities for Gifore Agricultural and Hubei Xingfa

0.71

Correlation Coefficient

Gifore Agricultural  Hubei Xingfa

Poor diversification

The 3 months correlation between Gifore and Hubei is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gifore Agricultural Machinery and Hubei Xingfa Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Xingfa Chemicals and Gifore Agricultural 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 Gifore Agricultural Machinery are associated (or correlated) with Hubei Xingfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Xingfa Chemicals has no effect on the direction of Gifore Agricultural i.e., Gifore Agricultural and Hubei Xingfa go up and down completely randomly.

Pair Corralation between Gifore Agricultural and Hubei Xingfa

Assuming the 90 days trading horizon Gifore Agricultural Machinery is expected to generate 1.42 times more return on investment than Hubei Xingfa. However, Gifore Agricultural is 1.42 times more volatile than Hubei Xingfa Chemicals. It trades about 0.17 of its potential returns per unit of risk. Hubei Xingfa Chemicals is currently generating about 0.15 per unit of risk. If you would invest  373.00  in Gifore Agricultural Machinery on September 22, 2024 and sell it today you would earn a total of  160.00  from holding Gifore Agricultural Machinery or generate 42.9% return on investment over 90 days.

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

Gifore Agricultural Machinery  vs.  Hubei Xingfa Chemicals

Gifore Agricultural

Risk-Adjusted Performance

13 of 100

Good

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

Hubei Xingfa Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Xingfa Chemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Xingfa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gifore Agricultural and Hubei Xingfa

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

The idea behind Gifore Agricultural Machinery and Hubei Xingfa Chemicals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.