Correlation Between Shanghai Ziyan and New Hope

Can any of the company-specific risk be diversified away by investing in both Shanghai Ziyan and New Hope 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 Shanghai Ziyan and New Hope into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Shanghai Ziyan and New Hope

-0.09

Correlation Coefficient

Shanghai Ziyan  New Hope

Good diversification

The 3 months correlation between Shanghai and New is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Ziyan Foods and New Hope Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope Dairy and Shanghai Ziyan 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 Shanghai Ziyan Foods are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope Dairy has no effect on the direction of Shanghai Ziyan i.e., Shanghai Ziyan and New Hope go up and down completely randomly.

Pair Corralation between Shanghai Ziyan and New Hope

Assuming the 90 days trading horizon Shanghai Ziyan is expected to generate 1.45 times less return on investment than New Hope. But when comparing it to its historical volatility, Shanghai Ziyan Foods is 2.0 times less risky than New Hope. It trades about 0.28 of its potential returns per unit of risk. New Hope Dairy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,363  in New Hope Dairy on December 4, 2024 and sell it today you would earn a total of  132.00  from holding New Hope Dairy or generate 9.68% return on investment over 90 days.

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

Shanghai Ziyan Foods  vs.  New Hope Dairy

Shanghai Ziyan Foods

Risk-Adjusted Performance

Very Weak

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

New Hope Dairy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Hope sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Ziyan and New Hope

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

The idea behind Shanghai Ziyan Foods and New Hope Dairy 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.