Correlation Between Jiahe Foods and Shandong Iron

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

Diversification Opportunities for Jiahe Foods and Shandong Iron

0.26

Correlation Coefficient

Jiahe Foods  Shandong Iron

Modest diversification

The 3 months correlation between Jiahe and Shandong is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Shandong Iron and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Iron 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 Shandong Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Iron has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Shandong Iron go up and down completely randomly.

Pair Corralation between Jiahe Foods and Shandong Iron

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 2.46 times more return on investment than Shandong Iron. However, Jiahe Foods is 2.46 times more volatile than Shandong Iron and. It trades about 0.02 of its potential returns per unit of risk. Shandong Iron and is currently generating about -0.07 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Jiahe Foods Industry  vs.  Shandong Iron and

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.

Shandong Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Iron and 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 Jiahe Foods and Shandong Iron

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

The idea behind Jiahe Foods Industry and Shandong Iron and 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.