Correlation Between HeBei Jinniu and Zhongyin Babi

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

By analyzing existing cross correlation between HeBei Jinniu Chemical and Zhongyin Babi Food, you can compare the effects of market volatilities on HeBei Jinniu and Zhongyin Babi 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 HeBei Jinniu with a short position of Zhongyin Babi. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and Zhongyin Babi.

Diversification Opportunities for HeBei Jinniu and Zhongyin Babi

0.92

Correlation Coefficient

HeBei Jinniu  Zhongyin Babi

Almost no diversification

The 3 months correlation between HeBei and Zhongyin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical and Zhongyin Babi Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongyin Babi Food and HeBei Jinniu 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 HeBei Jinniu Chemical are associated (or correlated) with Zhongyin Babi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongyin Babi Food has no effect on the direction of HeBei Jinniu i.e., HeBei Jinniu and Zhongyin Babi go up and down completely randomly.

Pair Corralation between HeBei Jinniu and Zhongyin Babi

Assuming the 90 days trading horizon HeBei Jinniu Chemical is expected to generate 1.28 times more return on investment than Zhongyin Babi. However, HeBei Jinniu is 1.28 times more volatile than Zhongyin Babi Food. It trades about 0.24 of its potential returns per unit of risk. Zhongyin Babi Food is currently generating about 0.29 per unit of risk. If you would invest  365.00  in HeBei Jinniu Chemical on September 13, 2024 and sell it today you would earn a total of  215.00  from holding HeBei Jinniu Chemical or generate 58.9% return on investment over 90 days.

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

HeBei Jinniu Chemical  vs.  Zhongyin Babi Food

HeBei Jinniu Chemical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongyin Babi Food

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongyin Babi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeBei Jinniu and Zhongyin Babi

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

The idea behind HeBei Jinniu Chemical and Zhongyin Babi Food 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.