Correlation Between Juewei Food and Lingyuan Iron

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

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

Diversification Opportunities for Juewei Food and Lingyuan Iron

0.91

Correlation Coefficient

Juewei Food  Lingyuan Iron

Almost no diversification

The 3 months correlation between Juewei and Lingyuan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Juewei Food Co and Lingyuan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lingyuan Iron Steel and Juewei Food 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 Juewei Food Co are associated (or correlated) with Lingyuan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lingyuan Iron Steel has no effect on the direction of Juewei Food i.e., Juewei Food and Lingyuan Iron go up and down completely randomly.

Pair Corralation between Juewei Food and Lingyuan Iron

Assuming the 90 days trading horizon Juewei Food Co is expected to under-perform the Lingyuan Iron. In addition to that, Juewei Food is 1.31 times more volatile than Lingyuan Iron Steel. It trades about -0.01 of its total potential returns per unit of risk. Lingyuan Iron Steel is currently generating about 0.02 per unit of volatility. If you would invest  167.00  in Lingyuan Iron Steel on October 21, 2024 and sell it today you would earn a total of  1.00  from holding Lingyuan Iron Steel or generate 0.6% return on investment over 90 days.

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

Juewei Food Co  vs.  Lingyuan Iron Steel

Juewei Food

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Juewei Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lingyuan Iron Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lingyuan Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lingyuan Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Juewei Food and Lingyuan Iron

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

The idea behind Juewei Food Co and Lingyuan Iron Steel 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.