Correlation Between Zhejiang Xiantong and Jiahe Foods

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

By analyzing existing cross correlation between Zhejiang Xiantong RubberPlastic and Jiahe Foods Industry, you can compare the effects of market volatilities on Zhejiang Xiantong and Jiahe 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 Zhejiang Xiantong with a short position of Jiahe Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Xiantong and Jiahe Foods.

Diversification Opportunities for Zhejiang Xiantong and Jiahe Foods

0.36

Correlation Coefficient

Zhejiang Xiantong  Jiahe Foods

Weak diversification

The 3 months correlation between Zhejiang and Jiahe is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Xiantong RubberPlasti and Jiahe Foods Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiahe Foods Industry and Zhejiang Xiantong 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 Zhejiang Xiantong RubberPlastic are associated (or correlated) with Jiahe Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiahe Foods Industry has no effect on the direction of Zhejiang Xiantong i.e., Zhejiang Xiantong and Jiahe Foods go up and down completely randomly.

Pair Corralation between Zhejiang Xiantong and Jiahe Foods

Assuming the 90 days trading horizon Zhejiang Xiantong RubberPlastic is expected to under-perform the Jiahe Foods. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Xiantong RubberPlastic is 2.8 times less risky than Jiahe Foods. The stock trades about -0.02 of its potential returns per unit of risk. The Jiahe Foods Industry is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Jiahe Foods Industry on December 4, 2024 and sell it today you would earn a total of  43.00  from holding Jiahe Foods Industry or generate 2.97% return on investment over 90 days.

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

Zhejiang Xiantong RubberPlasti  vs.  Jiahe Foods Industry

Zhejiang Xiantong

Risk-Adjusted Performance

Very Weak

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

Jiahe Foods Industry

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiahe Foods Industry are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiahe Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zhejiang Xiantong and Jiahe Foods

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

The idea behind Zhejiang Xiantong RubberPlastic and Jiahe Foods Industry 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.