Correlation Between Zhongyin Babi and Zhejiang JIULI

Can any of the company-specific risk be diversified away by investing in both Zhongyin Babi and Zhejiang JIULI 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 Zhongyin Babi and Zhejiang JIULI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongyin Babi Food and Zhejiang JIULI Hi tech, you can compare the effects of market volatilities on Zhongyin Babi and Zhejiang JIULI 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 Zhongyin Babi with a short position of Zhejiang JIULI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongyin Babi and Zhejiang JIULI.

Diversification Opportunities for Zhongyin Babi and Zhejiang JIULI

0.25

Correlation Coefficient

Zhongyin Babi  Zhejiang JIULI

Modest diversification

The 3 months correlation between Zhongyin and Zhejiang is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zhongyin Babi Food and Zhejiang JIULI Hi tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang JIULI Hi and Zhongyin Babi 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 Zhongyin Babi Food are associated (or correlated) with Zhejiang JIULI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang JIULI Hi has no effect on the direction of Zhongyin Babi i.e., Zhongyin Babi and Zhejiang JIULI go up and down completely randomly.

Pair Corralation between Zhongyin Babi and Zhejiang JIULI

Assuming the 90 days trading horizon Zhongyin Babi is expected to generate 2.28 times less return on investment than Zhejiang JIULI. In addition to that, Zhongyin Babi is 1.51 times more volatile than Zhejiang JIULI Hi tech. It trades about 0.02 of its total potential returns per unit of risk. Zhejiang JIULI Hi tech is currently generating about 0.08 per unit of volatility. If you would invest  2,346  in Zhejiang JIULI Hi tech on December 27, 2024 and sell it today you would earn a total of  145.00  from holding Zhejiang JIULI Hi tech or generate 6.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Zhongyin Babi Food  vs.  Zhejiang JIULI Hi tech

Zhongyin Babi Food

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongyin Babi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhejiang JIULI Hi

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang JIULI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zhongyin Babi and Zhejiang JIULI

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

The idea behind Zhongyin Babi Food and Zhejiang JIULI Hi tech 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.