Correlation Between XiAn Dagang and HaiXin Foods

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

By analyzing existing cross correlation between XiAn Dagang Road and HaiXin Foods Co, you can compare the effects of market volatilities on XiAn Dagang and HaiXin 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 XiAn Dagang with a short position of HaiXin Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiAn Dagang and HaiXin Foods.

Diversification Opportunities for XiAn Dagang and HaiXin Foods

0.58

Correlation Coefficient

XiAn Dagang  HaiXin Foods

Very weak diversification

The 3 months correlation between XiAn and HaiXin is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding XiAn Dagang Road and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and XiAn Dagang 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 XiAn Dagang Road are associated (or correlated) with HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of XiAn Dagang i.e., XiAn Dagang and HaiXin Foods go up and down completely randomly.

Pair Corralation between XiAn Dagang and HaiXin Foods

Assuming the 90 days trading horizon XiAn Dagang Road is expected to generate 1.35 times more return on investment than HaiXin Foods. However, XiAn Dagang is 1.35 times more volatile than HaiXin Foods Co. It trades about 0.0 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about -0.04 per unit of risk. If you would invest  693.00  in XiAn Dagang Road on December 23, 2024 and sell it today you would lose (27.00) from holding XiAn Dagang Road or give up 3.9% of portfolio value over 90 days.

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

XiAn Dagang Road  vs.  HaiXin Foods Co

XiAn Dagang Road

Risk-Adjusted Performance

Very Weak

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

HaiXin Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days HaiXin Foods Co 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.

Pair Trading with XiAn Dagang and HaiXin Foods

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

The idea behind XiAn Dagang Road and HaiXin Foods 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.