Correlation Between Ligao Foods and China Publishing

Can any of the company-specific risk be diversified away by investing in both Ligao Foods and China Publishing 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 China Publishing 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 China Publishing Media, you can compare the effects of market volatilities on Ligao Foods and China Publishing 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 China Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligao Foods and China Publishing.

Diversification Opportunities for Ligao Foods and China Publishing

0.7

Correlation Coefficient

Ligao Foods  China Publishing

Poor diversification

The 3 months correlation between Ligao and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ligao Foods CoLtd and China Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Publishing Media 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 China Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Publishing Media has no effect on the direction of Ligao Foods i.e., Ligao Foods and China Publishing go up and down completely randomly.

Pair Corralation between Ligao Foods and China Publishing

Assuming the 90 days trading horizon Ligao Foods CoLtd is expected to generate 1.8 times more return on investment than China Publishing. However, Ligao Foods is 1.8 times more volatile than China Publishing Media. It trades about 0.2 of its potential returns per unit of risk. China Publishing Media is currently generating about -0.16 per unit of risk. If you would invest  3,421  in Ligao Foods CoLtd on September 25, 2024 and sell it today you would earn a total of  620.00  from holding Ligao Foods CoLtd or generate 18.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Ligao Foods CoLtd  vs.  China Publishing Media

Ligao Foods CoLtd

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

China Publishing Media

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Ligao Foods and China Publishing

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

The idea behind Ligao Foods CoLtd and China Publishing Media 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.