Correlation Between Jiangsu Rongtai and Guangdong Wens

Can any of the company-specific risk be diversified away by investing in both Jiangsu Rongtai and Guangdong Wens 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 Jiangsu Rongtai and Guangdong Wens into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiangsu Rongtai Industry and Guangdong Wens Foodstuff, you can compare the effects of market volatilities on Jiangsu Rongtai and Guangdong Wens 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 Jiangsu Rongtai with a short position of Guangdong Wens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Rongtai and Guangdong Wens.

Diversification Opportunities for Jiangsu Rongtai and Guangdong Wens

-0.55

Correlation Coefficient

Jiangsu Rongtai  Guangdong Wens

Excellent diversification

The 3 months correlation between Jiangsu and Guangdong is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Rongtai Industry and Guangdong Wens Foodstuff in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Wens Foodstuff and Jiangsu Rongtai 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 Jiangsu Rongtai Industry are associated (or correlated) with Guangdong Wens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Wens Foodstuff has no effect on the direction of Jiangsu Rongtai i.e., Jiangsu Rongtai and Guangdong Wens go up and down completely randomly.

Pair Corralation between Jiangsu Rongtai and Guangdong Wens

Assuming the 90 days trading horizon Jiangsu Rongtai Industry is expected to generate 1.58 times more return on investment than Guangdong Wens. However, Jiangsu Rongtai is 1.58 times more volatile than Guangdong Wens Foodstuff. It trades about 0.01 of its potential returns per unit of risk. Guangdong Wens Foodstuff is currently generating about -0.02 per unit of risk. If you would invest  2,435  in Jiangsu Rongtai Industry on October 9, 2024 and sell it today you would lose (141.00) from holding Jiangsu Rongtai Industry or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.58%
Values	Daily Returns

Jiangsu Rongtai Industry  vs.  Guangdong Wens Foodstuff

Jiangsu Rongtai Industry

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Rongtai Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Rongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Wens Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Wens Foodstuff has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jiangsu Rongtai and Guangdong Wens

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

The idea behind Jiangsu Rongtai Industry and Guangdong Wens Foodstuff 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.