Correlation Between Jiahe Foods and China Longyuan

Can any of the company-specific risk be diversified away by investing in both Jiahe Foods and China Longyuan 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 Jiahe Foods and China Longyuan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiahe Foods Industry and China Longyuan Power, you can compare the effects of market volatilities on Jiahe Foods and China Longyuan 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 Jiahe Foods with a short position of China Longyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiahe Foods and China Longyuan.

Diversification Opportunities for Jiahe Foods and China Longyuan

0.0

Correlation Coefficient

Jiahe Foods  China Longyuan

Pay attention - limited upside

The 3 months correlation between Jiahe and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and China Longyuan Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Longyuan Power and Jiahe Foods 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 Jiahe Foods Industry are associated (or correlated) with China Longyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Longyuan Power has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and China Longyuan go up and down completely randomly.

Pair Corralation between Jiahe Foods and China Longyuan

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 2.27 times more return on investment than China Longyuan. However, Jiahe Foods is 2.27 times more volatile than China Longyuan Power. It trades about 0.04 of its potential returns per unit of risk. China Longyuan Power is currently generating about -0.21 per unit of risk. If you would invest  1,218  in Jiahe Foods Industry on October 7, 2024 and sell it today you would earn a total of  44.00  from holding Jiahe Foods Industry or generate 3.61% return on investment over 90 days.

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

Jiahe Foods Industry  vs.  China Longyuan Power

Jiahe Foods Industry

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Jiahe Foods Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiahe Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Longyuan Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Longyuan Power 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.

Pair Trading with Jiahe Foods and China Longyuan

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

The idea behind Jiahe Foods Industry and China Longyuan Power 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.