Correlation Between Guangzhou Boji and HaiXin Foods

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

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

Diversification Opportunities for Guangzhou Boji and HaiXin Foods

0.71

Correlation Coefficient

Guangzhou Boji  HaiXin Foods

Poor diversification

The 3 months correlation between Guangzhou and HaiXin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Guangzhou Boji 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 Guangzhou Boji Medical 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 Guangzhou Boji i.e., Guangzhou Boji and HaiXin Foods go up and down completely randomly.

Pair Corralation between Guangzhou Boji and HaiXin Foods

Assuming the 90 days trading horizon Guangzhou Boji is expected to generate 4.47 times less return on investment than HaiXin Foods. But when comparing it to its historical volatility, Guangzhou Boji Medical is 1.86 times less risky than HaiXin Foods. It trades about 0.06 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  417.00  in HaiXin Foods Co on September 21, 2024 and sell it today you would earn a total of  72.00  from holding HaiXin Foods Co or generate 17.27% return on investment over 90 days.

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

Guangzhou Boji Medical  vs.  HaiXin Foods Co

Guangzhou Boji Medical

Risk-Adjusted Performance

11 of 100

Good

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

HaiXin Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Boji and HaiXin Foods

The main advantage of trading using opposite Guangzhou Boji and HaiXin Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Boji 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 Guangzhou Boji Medical 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.