Correlation Between Zhongtong Guomai and Juewei Food

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

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

Diversification Opportunities for Zhongtong Guomai and Juewei Food

0.83

Correlation Coefficient

Zhongtong Guomai  Juewei Food

Very poor diversification

The 3 months correlation between Zhongtong and Juewei is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zhongtong Guomai Communication and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and Zhongtong Guomai 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 Zhongtong Guomai Communication are associated (or correlated) with Juewei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juewei Food has no effect on the direction of Zhongtong Guomai i.e., Zhongtong Guomai and Juewei Food go up and down completely randomly.

Pair Corralation between Zhongtong Guomai and Juewei Food

Assuming the 90 days trading horizon Zhongtong Guomai Communication is expected to under-perform the Juewei Food. But the stock apears to be less risky and, when comparing its historical volatility, Zhongtong Guomai Communication is 1.14 times less risky than Juewei Food. The stock trades about -0.23 of its potential returns per unit of risk. The Juewei Food Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,902  in Juewei Food Co on September 20, 2024 and sell it today you would earn a total of  8.00  from holding Juewei Food Co or generate 0.42% return on investment over 90 days.

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

Zhongtong Guomai Communication  vs.  Juewei Food Co

Zhongtong Guomai Com

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

Juewei Food

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Juewei Food Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Juewei Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongtong Guomai and Juewei Food

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

The idea behind Zhongtong Guomai Communication and Juewei Food 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.