Correlation Between Zhejiang Juhua and Qianhe CondimentFood

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

By analyzing existing cross correlation between Zhejiang Juhua Co and Qianhe CondimentFood Co, you can compare the effects of market volatilities on Zhejiang Juhua and Qianhe CondimentFood 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 Juhua with a short position of Qianhe CondimentFood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Juhua and Qianhe CondimentFood.

Diversification Opportunities for Zhejiang Juhua and Qianhe CondimentFood

0.78

Correlation Coefficient

Zhejiang Juhua  Qianhe CondimentFood

Poor diversification

The 3 months correlation between Zhejiang and Qianhe is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Qianhe CondimentFood Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qianhe CondimentFood and Zhejiang Juhua 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 Juhua Co are associated (or correlated) with Qianhe CondimentFood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qianhe CondimentFood has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Qianhe CondimentFood go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Qianhe CondimentFood

Assuming the 90 days trading horizon Zhejiang Juhua Co is expected to generate 1.17 times more return on investment than Qianhe CondimentFood. However, Zhejiang Juhua is 1.17 times more volatile than Qianhe CondimentFood Co. It trades about 0.29 of its potential returns per unit of risk. Qianhe CondimentFood Co is currently generating about 0.12 per unit of risk. If you would invest  2,101  in Zhejiang Juhua Co on September 27, 2024 and sell it today you would earn a total of  308.00  from holding Zhejiang Juhua Co or generate 14.66% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Qianhe CondimentFood Co

Zhejiang Juhua

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Qianhe CondimentFood

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qianhe CondimentFood Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qianhe CondimentFood 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 Juhua and Qianhe CondimentFood

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

The idea behind Zhejiang Juhua Co and Qianhe CondimentFood Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.