Correlation Between Jiahe Foods and OBiO Technology

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

Diversification Opportunities for Jiahe Foods and OBiO Technology

0.72

Correlation Coefficient

Jiahe Foods  OBiO Technology

Poor diversification

The 3 months correlation between Jiahe and OBiO is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and OBiO Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBiO Technology Corp 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 OBiO Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBiO Technology Corp has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and OBiO Technology go up and down completely randomly.

Pair Corralation between Jiahe Foods and OBiO Technology

Assuming the 90 days trading horizon Jiahe Foods Industry is expected to generate 0.76 times more return on investment than OBiO Technology. However, Jiahe Foods Industry is 1.32 times less risky than OBiO Technology. It trades about 0.02 of its potential returns per unit of risk. OBiO Technology Corp is currently generating about -0.05 per unit of risk. If you would invest  1,626  in Jiahe Foods Industry on September 4, 2024 and sell it today you would earn a total of  49.00  from holding Jiahe Foods Industry or generate 3.01% return on investment over 90 days.

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

Jiahe Foods Industry  vs.  OBiO Technology Corp

Jiahe Foods Industry

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiahe Foods Industry are ranked lower than 17 (%) 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.

OBiO Technology Corp

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Jiahe Foods and OBiO Technology

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

The idea behind Jiahe Foods Industry and OBiO Technology Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.