Correlation Between Gansu Jiu and HaiXin Foods

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

By analyzing existing cross correlation between Gansu Jiu Steel and HaiXin Foods Co, you can compare the effects of market volatilities on Gansu Jiu and HaiXin Foods 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 Gansu Jiu with a short position of HaiXin Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Jiu and HaiXin Foods.

Diversification Opportunities for Gansu Jiu and HaiXin Foods

0.8

Correlation Coefficient

Gansu Jiu  HaiXin Foods

Very poor diversification

The 3 months correlation between Gansu and HaiXin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Gansu Jiu 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 Gansu Jiu Steel are associated (or correlated) with HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and HaiXin Foods go up and down completely randomly.

Pair Corralation between Gansu Jiu and HaiXin Foods

Assuming the 90 days trading horizon Gansu Jiu is expected to generate 1.6 times less return on investment than HaiXin Foods. In addition to that, Gansu Jiu is 1.08 times more volatile than HaiXin Foods Co. It trades about 0.2 of its total potential returns per unit of risk. HaiXin Foods Co is currently generating about 0.34 per unit of volatility. If you would invest  297.00  in HaiXin Foods Co on September 13, 2024 and sell it today you would earn a total of  293.00  from holding HaiXin Foods Co or generate 98.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Gansu Jiu Steel  vs.  HaiXin Foods Co

Gansu Jiu Steel

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu sustained solid returns over the last few months and may actually be approaching a breakup point.

HaiXin Foods

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Jiu and HaiXin Foods

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

The idea behind Gansu Jiu Steel and HaiXin Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.