Correlation Between Bright Dairy and Fujian Anjoy

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

By analyzing existing cross correlation between Bright Dairy Food and Fujian Anjoy Foods, you can compare the effects of market volatilities on Bright Dairy and Fujian Anjoy 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 Bright Dairy with a short position of Fujian Anjoy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Dairy and Fujian Anjoy.

Diversification Opportunities for Bright Dairy and Fujian Anjoy

0.96

Correlation Coefficient

Bright Dairy  Fujian Anjoy

Almost no diversification

The 3 months correlation between Bright and Fujian is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bright Dairy Food and Fujian Anjoy Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Anjoy Foods and Bright Dairy 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 Bright Dairy Food are associated (or correlated) with Fujian Anjoy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Anjoy Foods has no effect on the direction of Bright Dairy i.e., Bright Dairy and Fujian Anjoy go up and down completely randomly.

Pair Corralation between Bright Dairy and Fujian Anjoy

Assuming the 90 days trading horizon Bright Dairy Food is expected to generate 0.8 times more return on investment than Fujian Anjoy. However, Bright Dairy Food is 1.25 times less risky than Fujian Anjoy. It trades about -0.07 of its potential returns per unit of risk. Fujian Anjoy Foods is currently generating about -0.07 per unit of risk. If you would invest  876.00  in Bright Dairy Food on December 5, 2024 and sell it today you would lose (59.00) from holding Bright Dairy Food or give up 6.74% of portfolio value over 90 days.

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

Bright Dairy Food  vs.  Fujian Anjoy Foods

Bright Dairy Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Dairy Food 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.

Fujian Anjoy Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fujian Anjoy Foods 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 Bright Dairy and Fujian Anjoy

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

The idea behind Bright Dairy Food and Fujian Anjoy Foods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.