Correlation Between Guangdong Jinma and Xiangpiaopiao Food

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

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

Diversification Opportunities for Guangdong Jinma and Xiangpiaopiao Food

0.86

Correlation Coefficient

Guangdong Jinma  Xiangpiaopiao Food

Very poor diversification

The 3 months correlation between Guangdong and Xiangpiaopiao is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinma Entertainment and Xiangpiaopiao Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangpiaopiao Food and Guangdong Jinma 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 Jinma Entertainment are associated (or correlated) with Xiangpiaopiao Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangpiaopiao Food has no effect on the direction of Guangdong Jinma i.e., Guangdong Jinma and Xiangpiaopiao Food go up and down completely randomly.

Pair Corralation between Guangdong Jinma and Xiangpiaopiao Food

Assuming the 90 days trading horizon Guangdong Jinma Entertainment is expected to under-perform the Xiangpiaopiao Food. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Jinma Entertainment is 1.6 times less risky than Xiangpiaopiao Food. The stock trades about -0.12 of its potential returns per unit of risk. The Xiangpiaopiao Food Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,361  in Xiangpiaopiao Food Co on September 26, 2024 and sell it today you would earn a total of  274.00  from holding Xiangpiaopiao Food Co or generate 20.13% return on investment over 90 days.

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

Guangdong Jinma Entertainment  vs.  Xiangpiaopiao Food Co

Guangdong Jinma Ente

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinma Entertainment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinma sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangpiaopiao Food

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Guangdong Jinma and Xiangpiaopiao Food

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

The idea behind Guangdong Jinma Entertainment and Xiangpiaopiao 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.