Correlation Between Jiahe Foods and Shenzhen Bingchuan

Can any of the company-specific risk be diversified away by investing in both Jiahe Foods and Shenzhen Bingchuan 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 Shenzhen Bingchuan 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 Shenzhen Bingchuan Network, you can compare the effects of market volatilities on Jiahe Foods and Shenzhen Bingchuan 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 Shenzhen Bingchuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiahe Foods and Shenzhen Bingchuan.

Diversification Opportunities for Jiahe Foods and Shenzhen Bingchuan

0.77

Correlation Coefficient

Jiahe Foods  Shenzhen Bingchuan

Poor diversification

The 3 months correlation between Jiahe and Shenzhen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Shenzhen Bingchuan Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Bingchuan 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 Shenzhen Bingchuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Bingchuan has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Shenzhen Bingchuan go up and down completely randomly.

Pair Corralation between Jiahe Foods and Shenzhen Bingchuan

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 0.83 times more return on investment than Shenzhen Bingchuan. However, Jiahe Foods Industry is 1.2 times less risky than Shenzhen Bingchuan. It trades about -0.29 of its potential returns per unit of risk. Shenzhen Bingchuan Network is currently generating about -0.31 per unit of risk. If you would invest  1,482  in Jiahe Foods Industry on October 9, 2024 and sell it today you would lose (284.00) from holding Jiahe Foods Industry or give up 19.16% of portfolio value over 90 days.

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

Jiahe Foods Industry  vs.  Shenzhen Bingchuan Network

Jiahe Foods Industry

Risk-Adjusted Performance

0 of 100

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.

Shenzhen Bingchuan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bingchuan Network are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bingchuan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jiahe Foods and Shenzhen Bingchuan

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

The idea behind Jiahe Foods Industry and Shenzhen Bingchuan Network 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.