Correlation Between Guangdong Wens and Juewei Food

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

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

Diversification Opportunities for Guangdong Wens and Juewei Food

0.66

Correlation Coefficient

Guangdong Wens  Juewei Food

Poor diversification

The 3 months correlation between Guangdong and Juewei is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and Guangdong Wens 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 Guangdong Wens Foodstuff are associated (or correlated) with Juewei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juewei Food has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and Juewei Food go up and down completely randomly.

Pair Corralation between Guangdong Wens and Juewei Food

Assuming the 90 days trading horizon Guangdong Wens Foodstuff is expected to generate 0.52 times more return on investment than Juewei Food. However, Guangdong Wens Foodstuff is 1.92 times less risky than Juewei Food. It trades about 0.03 of its potential returns per unit of risk. Juewei Food Co is currently generating about -0.04 per unit of risk. If you would invest  1,672  in Guangdong Wens Foodstuff on December 30, 2024 and sell it today you would earn a total of  24.00  from holding Guangdong Wens Foodstuff or generate 1.44% return on investment over 90 days.

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

Guangdong Wens Foodstuff  vs.  Juewei Food Co

Guangdong Wens Foodstuff

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Wens Foodstuff are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Wens is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Juewei Food

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangdong Wens and Juewei Food

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

The idea behind Guangdong Wens Foodstuff and Juewei Food 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.