Correlation Between Great-Sun Foods and Hubei Forbon

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

By analyzing existing cross correlation between Great Sun Foods Co and Hubei Forbon Technology, you can compare the effects of market volatilities on Great-Sun Foods and Hubei Forbon 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 Great-Sun Foods with a short position of Hubei Forbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-Sun Foods and Hubei Forbon.

Diversification Opportunities for Great-Sun Foods and Hubei Forbon

0.52

Correlation Coefficient

Great-Sun Foods  Hubei Forbon

Very weak diversification

The 3 months correlation between Great-Sun and Hubei is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Great Sun Foods Co and Hubei Forbon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Forbon Technology and Great-Sun Foods 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 Great Sun Foods Co are associated (or correlated) with Hubei Forbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Forbon Technology has no effect on the direction of Great-Sun Foods i.e., Great-Sun Foods and Hubei Forbon go up and down completely randomly.

Pair Corralation between Great-Sun Foods and Hubei Forbon

Assuming the 90 days trading horizon Great Sun Foods Co is expected to under-perform the Hubei Forbon. In addition to that, Great-Sun Foods is 1.09 times more volatile than Hubei Forbon Technology. It trades about 0.0 of its total potential returns per unit of risk. Hubei Forbon Technology is currently generating about 0.01 per unit of volatility. If you would invest  927.00  in Hubei Forbon Technology on December 1, 2024 and sell it today you would lose (9.00) from holding Hubei Forbon Technology or give up 0.97% of portfolio value over 90 days.

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

Great Sun Foods Co  vs.  Hubei Forbon Technology

Great Sun Foods

Risk-Adjusted Performance

Very Weak

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

Hubei Forbon Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Great-Sun Foods and Hubei Forbon

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

The idea behind Great Sun Foods Co and Hubei Forbon Technology 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.