Correlation Between Ligao Foods and Zhejiang Xiantong

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

Diversification Opportunities for Ligao Foods and Zhejiang Xiantong

0.32

Correlation Coefficient

Ligao Foods  Zhejiang Xiantong

Weak diversification

The 3 months correlation between Ligao and Zhejiang is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ligao Foods CoLtd and Zhejiang Xiantong RubberPlasti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Xiantong 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 Zhejiang Xiantong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Xiantong has no effect on the direction of Ligao Foods i.e., Ligao Foods and Zhejiang Xiantong go up and down completely randomly.

Pair Corralation between Ligao Foods and Zhejiang Xiantong

Assuming the 90 days trading horizon Ligao Foods CoLtd is expected to generate 2.3 times more return on investment than Zhejiang Xiantong. However, Ligao Foods is 2.3 times more volatile than Zhejiang Xiantong RubberPlastic. It trades about 0.05 of its potential returns per unit of risk. Zhejiang Xiantong RubberPlastic is currently generating about -0.02 per unit of risk. If you would invest  3,978  in Ligao Foods CoLtd on December 4, 2024 and sell it today you would earn a total of  230.00  from holding Ligao Foods CoLtd or generate 5.78% 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.  Zhejiang Xiantong RubberPlasti

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.

Zhejiang Xiantong

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ligao Foods and Zhejiang Xiantong

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

The idea behind Ligao Foods CoLtd and Zhejiang Xiantong RubberPlastic 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.