Correlation Between Jiahe Foods and Dongfeng Automobile

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

Diversification Opportunities for Jiahe Foods and Dongfeng Automobile

0.56

Correlation Coefficient

Jiahe Foods  Dongfeng Automobile

Very weak diversification

The 3 months correlation between Jiahe and Dongfeng is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Dongfeng Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Automobile 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 Dongfeng Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Automobile has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Dongfeng Automobile go up and down completely randomly.

Pair Corralation between Jiahe Foods and Dongfeng Automobile

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 1.32 times more return on investment than Dongfeng Automobile. However, Jiahe Foods is 1.32 times more volatile than Dongfeng Automobile Co. It trades about 0.02 of its potential returns per unit of risk. Dongfeng Automobile Co is currently generating about 0.02 per unit of risk. If you would invest  1,368  in Jiahe Foods Industry on December 25, 2024 and sell it today you would earn a total of  2.00  from holding Jiahe Foods Industry or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Jiahe Foods Industry  vs.  Dongfeng Automobile Co

Jiahe Foods Industry

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiahe Foods Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Dongfeng Automobile

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Automobile Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongfeng Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiahe Foods and Dongfeng Automobile

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

The idea behind Jiahe Foods Industry and Dongfeng Automobile Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.