Correlation Between HF FOODS and China Mobile

Can any of the company-specific risk be diversified away by investing in both HF FOODS and China Mobile 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 HF FOODS and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HF FOODS GRP and China Life Insurance, you can compare the effects of market volatilities on HF FOODS and China Mobile 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 HF FOODS with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF FOODS and China Mobile.

Diversification Opportunities for HF FOODS and China Mobile

-0.01

Correlation Coefficient

HF FOODS  China Mobile

Good diversification

The 3 months correlation between 3GX and China is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding HF FOODS GRP and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and HF 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 HF FOODS GRP are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of HF FOODS i.e., HF FOODS and China Mobile go up and down completely randomly.

Pair Corralation between HF FOODS and China Mobile

Assuming the 90 days horizon HF FOODS GRP is expected to under-perform the China Mobile. In addition to that, HF FOODS is 1.14 times more volatile than China Life Insurance. It trades about -0.6 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.1 per unit of volatility. If you would invest  173.00  in China Life Insurance on December 5, 2024 and sell it today you would earn a total of  8.00  from holding China Life Insurance or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

HF FOODS GRP  vs.  China Life Insurance

HF FOODS GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days HF FOODS GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HF FOODS and China Mobile

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

The idea behind HF FOODS GRP and China Life Insurance 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.