Correlation Between Zhejiang Tailin and Huasi Agricultural

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

By analyzing existing cross correlation between Zhejiang Tailin Bioengineering and Huasi Agricultural Development, you can compare the effects of market volatilities on Zhejiang Tailin and Huasi Agricultural 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 Zhejiang Tailin with a short position of Huasi Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Tailin and Huasi Agricultural.

Diversification Opportunities for Zhejiang Tailin and Huasi Agricultural

0.19

Correlation Coefficient

Zhejiang Tailin  Huasi Agricultural

Average diversification

The 3 months correlation between Zhejiang and Huasi is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Tailin Bioengineering and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural and Zhejiang Tailin 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 Zhejiang Tailin Bioengineering are associated (or correlated) with Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Zhejiang Tailin i.e., Zhejiang Tailin and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Zhejiang Tailin and Huasi Agricultural

Assuming the 90 days trading horizon Zhejiang Tailin Bioengineering is expected to under-perform the Huasi Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Tailin Bioengineering is 1.24 times less risky than Huasi Agricultural. The stock trades about -0.09 of its potential returns per unit of risk. The Huasi Agricultural Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  382.00  in Huasi Agricultural Development on October 25, 2024 and sell it today you would lose (2.00) from holding Huasi Agricultural Development or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Zhejiang Tailin Bioengineering  vs.  Huasi Agricultural Development

Zhejiang Tailin Bioe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Tailin Bioengineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Huasi Agricultural

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huasi Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Tailin and Huasi Agricultural

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

The idea behind Zhejiang Tailin Bioengineering and Huasi Agricultural Development 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.