Correlation Between Allied Machinery and Jiajia Food

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

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

Diversification Opportunities for Allied Machinery and Jiajia Food

0.74

Correlation Coefficient

Allied Machinery  Jiajia Food

Poor diversification

The 3 months correlation between Allied and Jiajia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Allied Machinery Co and Jiajia Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiajia Food Group and Allied Machinery 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 Allied Machinery Co are associated (or correlated) with Jiajia Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiajia Food Group has no effect on the direction of Allied Machinery i.e., Allied Machinery and Jiajia Food go up and down completely randomly.

Pair Corralation between Allied Machinery and Jiajia Food

Assuming the 90 days trading horizon Allied Machinery Co is expected to under-perform the Jiajia Food. But the stock apears to be less risky and, when comparing its historical volatility, Allied Machinery Co is 1.06 times less risky than Jiajia Food. The stock trades about -0.01 of its potential returns per unit of risk. The Jiajia Food Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  437.00  in Jiajia Food Group on October 11, 2024 and sell it today you would earn a total of  14.00  from holding Jiajia Food Group or generate 3.2% return on investment over 90 days.

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

Allied Machinery Co  vs.  Jiajia Food Group

Allied Machinery

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Machinery Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allied Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiajia Food Group

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiajia Food Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiajia Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Machinery and Jiajia Food

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

The idea behind Allied Machinery Co and Jiajia Food Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.