Correlation Between Harbin Hatou and Ligao Foods

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

By analyzing existing cross correlation between Harbin Hatou Investment and Ligao Foods CoLtd, you can compare the effects of market volatilities on Harbin Hatou and Ligao 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 Harbin Hatou with a short position of Ligao Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Hatou and Ligao Foods.

Diversification Opportunities for Harbin Hatou and Ligao Foods

0.81

Correlation Coefficient

Harbin Hatou  Ligao Foods

Very poor diversification

The 3 months correlation between Harbin and Ligao is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and Ligao Foods CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligao Foods CoLtd and Harbin Hatou 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 Harbin Hatou Investment are associated (or correlated) with Ligao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligao Foods CoLtd has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and Ligao Foods go up and down completely randomly.

Pair Corralation between Harbin Hatou and Ligao Foods

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to under-perform the Ligao Foods. But the stock apears to be less risky and, when comparing its historical volatility, Harbin Hatou Investment is 1.26 times less risky than Ligao Foods. The stock trades about -0.19 of its potential returns per unit of risk. The Ligao Foods CoLtd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,790  in Ligao Foods CoLtd on October 8, 2024 and sell it today you would lose (18.00) from holding Ligao Foods CoLtd or give up 0.47% of portfolio value over 90 days.

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

Harbin Hatou Investment  vs.  Ligao Foods CoLtd

Harbin Hatou Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbin Hatou Investment 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.

Ligao Foods CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ligao Foods CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ligao Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harbin Hatou and Ligao Foods

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

The idea behind Harbin Hatou Investment and Ligao Foods CoLtd 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.