Correlation Between Xiangpiaopiao Food and Chongqing Rural

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

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

Diversification Opportunities for Xiangpiaopiao Food and Chongqing Rural

0.42

Correlation Coefficient

Xiangpiaopiao Food  Chongqing Rural

Very weak diversification

The 3 months correlation between Xiangpiaopiao and Chongqing is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xiangpiaopiao Food Co and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm and Xiangpiaopiao 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 Xiangpiaopiao Food Co are associated (or correlated) with Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Xiangpiaopiao Food i.e., Xiangpiaopiao Food and Chongqing Rural go up and down completely randomly.

Pair Corralation between Xiangpiaopiao Food and Chongqing Rural

Assuming the 90 days trading horizon Xiangpiaopiao Food Co is expected to generate 1.91 times more return on investment than Chongqing Rural. However, Xiangpiaopiao Food is 1.91 times more volatile than Chongqing Rural Commercial. It trades about 0.13 of its potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.07 per unit of risk. If you would invest  1,348  in Xiangpiaopiao Food Co on September 30, 2024 and sell it today you would earn a total of  507.00  from holding Xiangpiaopiao Food Co or generate 37.61% return on investment over 90 days.

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

Xiangpiaopiao Food Co  vs.  Chongqing Rural Commercial

Xiangpiaopiao Food

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangpiaopiao Food Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangpiaopiao Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Rural Comm

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Rural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xiangpiaopiao Food and Chongqing Rural

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

The idea behind Xiangpiaopiao Food Co and Chongqing Rural Commercial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.