Correlation Between Jiahe Foods and HeBei Jinniu

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

Diversification Opportunities for Jiahe Foods and HeBei Jinniu

0.85

Correlation Coefficient

Jiahe Foods  HeBei Jinniu

Very poor diversification

The 3 months correlation between Jiahe and HeBei is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and HeBei Jinniu go up and down completely randomly.

Pair Corralation between Jiahe Foods and HeBei Jinniu

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to under-perform the HeBei Jinniu. In addition to that, Jiahe Foods is 1.02 times more volatile than HeBei Jinniu Chemical. It trades about -0.03 of its total potential returns per unit of risk. HeBei Jinniu Chemical is currently generating about 0.01 per unit of volatility. If you would invest  495.00  in HeBei Jinniu Chemical on October 4, 2024 and sell it today you would lose (27.00) from holding HeBei Jinniu Chemical or give up 5.45% of portfolio value over 90 days.

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

Jiahe Foods Industry  vs.  HeBei Jinniu Chemical

Jiahe Foods Industry

Risk-Adjusted Performance

1 of 100

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.

HeBei Jinniu Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HeBei Jinniu 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 HeBei Jinniu

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

The idea behind Jiahe Foods Industry and HeBei Jinniu Chemical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.