Correlation Between Zhengzhou Coal and HaiXin Foods

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

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

Diversification Opportunities for Zhengzhou Coal and HaiXin Foods

-0.03

Correlation Coefficient

Zhengzhou Coal  HaiXin Foods

Good diversification

The 3 months correlation between Zhengzhou and HaiXin is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Zhengzhou Coal 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 Zhengzhou Coal Mining 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 Zhengzhou Coal i.e., Zhengzhou Coal and HaiXin Foods go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and HaiXin Foods

Assuming the 90 days trading horizon Zhengzhou Coal Mining is expected to under-perform the HaiXin Foods. But the stock apears to be less risky and, when comparing its historical volatility, Zhengzhou Coal Mining is 3.33 times less risky than HaiXin Foods. The stock trades about -0.04 of its potential returns per unit of risk. The HaiXin Foods Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  383.00  in HaiXin Foods Co on October 26, 2024 and sell it today you would earn a total of  22.00  from holding HaiXin Foods Co or generate 5.74% return on investment over 90 days.

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

Zhengzhou Coal Mining  vs.  HaiXin Foods Co

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

HaiXin Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zhengzhou Coal and HaiXin Foods

The main advantage of trading using opposite Zhengzhou Coal and HaiXin Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhengzhou Coal 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 Zhengzhou Coal Mining 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.