Correlation Between Ligao Foods and Shenzhen Topway

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

By analyzing existing cross correlation between Ligao Foods CoLtd and Shenzhen Topway Video, you can compare the effects of market volatilities on Ligao Foods and Shenzhen Topway 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 Ligao Foods with a short position of Shenzhen Topway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligao Foods and Shenzhen Topway.

Diversification Opportunities for Ligao Foods and Shenzhen Topway

0.37

Correlation Coefficient

Ligao Foods  Shenzhen Topway

Weak diversification

The 3 months correlation between Ligao and Shenzhen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ligao Foods CoLtd and Shenzhen Topway Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Topway Video and Ligao Foods 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 Ligao Foods CoLtd are associated (or correlated) with Shenzhen Topway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Topway Video has no effect on the direction of Ligao Foods i.e., Ligao Foods and Shenzhen Topway go up and down completely randomly.

Pair Corralation between Ligao Foods and Shenzhen Topway

Assuming the 90 days trading horizon Ligao Foods is expected to generate 1.6 times less return on investment than Shenzhen Topway. But when comparing it to its historical volatility, Ligao Foods CoLtd is 1.38 times less risky than Shenzhen Topway. It trades about 0.16 of its potential returns per unit of risk. Shenzhen Topway Video is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  789.00  in Shenzhen Topway Video on December 1, 2024 and sell it today you would earn a total of  86.00  from holding Shenzhen Topway Video or generate 10.9% return on investment over 90 days.

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

Ligao Foods CoLtd  vs.  Shenzhen Topway Video

Ligao Foods CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shenzhen Topway Video

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Topway Video 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ligao Foods and Shenzhen Topway

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

The idea behind Ligao Foods CoLtd and Shenzhen Topway Video 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.