Correlation Between Eastroc Beverage and Jiamei Food

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Jiamei Food 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 Eastroc Beverage and Jiamei Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastroc Beverage Group and Jiamei Food Packaging, you can compare the effects of market volatilities on Eastroc Beverage and Jiamei Food 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 Eastroc Beverage with a short position of Jiamei Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Jiamei Food.

Diversification Opportunities for Eastroc Beverage and Jiamei Food

0.86

Correlation Coefficient

Eastroc Beverage  Jiamei Food

Very poor diversification

The 3 months correlation between Eastroc and Jiamei is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Jiamei Food Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiamei Food Packaging and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Jiamei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiamei Food Packaging has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Jiamei Food go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Jiamei Food

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 0.99 times more return on investment than Jiamei Food. However, Eastroc Beverage Group is 1.01 times less risky than Jiamei Food. It trades about 0.08 of its potential returns per unit of risk. Jiamei Food Packaging is currently generating about -0.01 per unit of risk. If you would invest  13,071  in Eastroc Beverage Group on September 19, 2024 and sell it today you would earn a total of  12,129  from holding Eastroc Beverage Group or generate 92.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Eastroc Beverage Group  vs.  Jiamei Food Packaging

Eastroc Beverage

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiamei Food Packaging

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiamei Food Packaging are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiamei Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Jiamei Food

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

The idea behind Eastroc Beverage Group and Jiamei Food Packaging 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.