Correlation Between V V and Shandong Longda

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

By analyzing existing cross correlation between V V Food and Shandong Longda Meat, you can compare the effects of market volatilities on V V and Shandong Longda 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 V V with a short position of Shandong Longda. Check out your portfolio center. Please also check ongoing floating volatility patterns of V V and Shandong Longda.

Diversification Opportunities for V V and Shandong Longda

0.74

Correlation Coefficient

V V  Shandong Longda

Poor diversification

The 3 months correlation between 600300 and Shandong is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding V V Food and Shandong Longda Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longda Meat and V V 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 V V Food are associated (or correlated) with Shandong Longda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longda Meat has no effect on the direction of V V i.e., V V and Shandong Longda go up and down completely randomly.

Pair Corralation between V V and Shandong Longda

Assuming the 90 days trading horizon V V Food is expected to generate 1.13 times more return on investment than Shandong Longda. However, V V is 1.13 times more volatile than Shandong Longda Meat. It trades about 0.01 of its potential returns per unit of risk. Shandong Longda Meat is currently generating about 0.0 per unit of risk. If you would invest  313.00  in V V Food on October 7, 2024 and sell it today you would lose (6.00) from holding V V Food or give up 1.92% of portfolio value over 90 days.

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

V V Food  vs.  Shandong Longda Meat

V V Food

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in V V Food are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, V V may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shandong Longda Meat

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longda Meat are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Longda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with V V and Shandong Longda

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

The idea behind V V Food and Shandong Longda Meat 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.