Correlation Between Jinhui Liquor and Guilin Seamild

Can any of the company-specific risk be diversified away by investing in both Jinhui Liquor and Guilin Seamild 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 Jinhui Liquor and Guilin Seamild into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhui Liquor Co and Guilin Seamild Foods, you can compare the effects of market volatilities on Jinhui Liquor and Guilin Seamild 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 Jinhui Liquor with a short position of Guilin Seamild. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhui Liquor and Guilin Seamild.

Diversification Opportunities for Jinhui Liquor and Guilin Seamild

-0.02

Correlation Coefficient

Jinhui Liquor  Guilin Seamild

Good diversification

The 3 months correlation between Jinhui and Guilin is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Guilin Seamild go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Guilin Seamild

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Guilin Seamild. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.06 times less risky than Guilin Seamild. The stock trades about -0.09 of its potential returns per unit of risk. The Guilin Seamild Foods is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,369  in Guilin Seamild Foods on October 8, 2024 and sell it today you would earn a total of  234.00  from holding Guilin Seamild Foods or generate 17.09% return on investment over 90 days.

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

Jinhui Liquor Co  vs.  Guilin Seamild Foods

Jinhui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinhui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guilin Seamild Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinhui Liquor and Guilin Seamild

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

The idea behind Jinhui Liquor Co and Guilin Seamild Foods 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.