Correlation Between Jiahe Foods and Fushun Special

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

Diversification Opportunities for Jiahe Foods and Fushun Special

0.43

Correlation Coefficient

Jiahe Foods  Fushun Special

Very weak diversification

The 3 months correlation between Jiahe and Fushun is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Fushun Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fushun Special Steel 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 Fushun Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fushun Special Steel has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Fushun Special go up and down completely randomly.

Pair Corralation between Jiahe Foods and Fushun Special

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 0.99 times more return on investment than Fushun Special. However, Jiahe Foods Industry is 1.01 times less risky than Fushun Special. It trades about 0.0 of its potential returns per unit of risk. Fushun Special Steel is currently generating about -0.05 per unit of risk. If you would invest  1,678  in Jiahe Foods Industry on September 17, 2024 and sell it today you would lose (190.00) from holding Jiahe Foods Industry or give up 11.32% of portfolio value over 90 days.

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

Jiahe Foods Industry  vs.  Fushun Special Steel

Jiahe Foods Industry

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiahe Foods Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiahe Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Fushun Special Steel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fushun Special Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fushun Special sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiahe Foods and Fushun Special

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

The idea behind Jiahe Foods Industry and Fushun Special Steel 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .