Correlation Between Huafa Industrial and HaiXin Foods

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

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

Diversification Opportunities for Huafa Industrial and HaiXin Foods

0.57

Correlation Coefficient

Huafa Industrial  HaiXin Foods

Very weak diversification

The 3 months correlation between Huafa and HaiXin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Huafa Industrial Co and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Huafa Industrial 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 Huafa Industrial Co 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 Huafa Industrial i.e., Huafa Industrial and HaiXin Foods go up and down completely randomly.

Pair Corralation between Huafa Industrial and HaiXin Foods

Assuming the 90 days trading horizon Huafa Industrial Co is expected to generate 0.53 times more return on investment than HaiXin Foods. However, Huafa Industrial Co is 1.88 times less risky than HaiXin Foods. It trades about -0.01 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about -0.11 per unit of risk. If you would invest  570.00  in Huafa Industrial Co on December 2, 2024 and sell it today you would lose (5.00) from holding Huafa Industrial Co or give up 0.88% of portfolio value over 90 days.

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

Huafa Industrial Co  vs.  HaiXin Foods Co

Huafa Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huafa Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HaiXin Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days HaiXin Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Huafa Industrial and HaiXin Foods

The main advantage of trading using opposite Huafa Industrial and HaiXin Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huafa Industrial 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 Huafa Industrial Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.