Correlation Between Jiahe Foods and Shandong Sinoglory

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

Diversification Opportunities for Jiahe Foods and Shandong Sinoglory

0.83

Correlation Coefficient

Jiahe Foods  Shandong Sinoglory

Very poor diversification

The 3 months correlation between Jiahe and Shandong is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Shandong Sinoglory Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sinoglory Health 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 Sinoglory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sinoglory Health has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Shandong Sinoglory go up and down completely randomly.

Pair Corralation between Jiahe Foods and Shandong Sinoglory

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 1.5 times more return on investment than Shandong Sinoglory. However, Jiahe Foods is 1.5 times more volatile than Shandong Sinoglory Health. It trades about 0.18 of its potential returns per unit of risk. Shandong Sinoglory Health is currently generating about 0.16 per unit of risk. If you would invest  1,042  in Jiahe Foods Industry on September 12, 2024 and sell it today you would earn a total of  444.00  from holding Jiahe Foods Industry or generate 42.61% return on investment over 90 days.

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

Jiahe Foods Industry  vs.  Shandong Sinoglory Health

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.

Shandong Sinoglory Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sinoglory sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiahe Foods and Shandong Sinoglory

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

The idea behind Jiahe Foods Industry and Shandong Sinoglory Health 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.