Correlation Between China Life and Juewei Food

Can any of the company-specific risk be diversified away by investing in both China Life and Juewei Food 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 China Life and Juewei Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Life Insurance and Juewei Food Co, you can compare the effects of market volatilities on China Life and Juewei Food 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 China Life with a short position of Juewei Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Juewei Food.

Diversification Opportunities for China Life and Juewei Food

0.63

Correlation Coefficient

China Life  Juewei Food

Poor diversification

The 3 months correlation between China and Juewei is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and China Life 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 China Life Insurance are associated (or correlated) with Juewei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juewei Food has no effect on the direction of China Life i.e., China Life and Juewei Food go up and down completely randomly.

Pair Corralation between China Life and Juewei Food

Assuming the 90 days trading horizon China Life Insurance is expected to under-perform the Juewei Food. But the stock apears to be less risky and, when comparing its historical volatility, China Life Insurance is 1.18 times less risky than Juewei Food. The stock trades about -0.11 of its potential returns per unit of risk. The Juewei Food Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,709  in Juewei Food Co on December 26, 2024 and sell it today you would lose (147.00) from holding Juewei Food Co or give up 8.6% of portfolio value over 90 days.

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

China Life Insurance  vs.  Juewei Food Co

China Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Life Insurance 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.

Juewei Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Juewei Food 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 China Life and Juewei Food

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

The idea behind China Life Insurance and Juewei Food 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.