Correlation Between China Feihe and Aryzta AG

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Can any of the company-specific risk be diversified away by investing in both China Feihe and Aryzta AG 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 China Feihe and Aryzta AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Feihe Limited and Aryzta AG PK, you can compare the effects of market volatilities on China Feihe and Aryzta AG 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 China Feihe with a short position of Aryzta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Feihe and Aryzta AG.

Diversification Opportunities for China Feihe and Aryzta AG

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between China and Aryzta is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Feihe Limited and Aryzta AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryzta AG PK and China Feihe 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 China Feihe Limited are associated (or correlated) with Aryzta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryzta AG PK has no effect on the direction of China Feihe i.e., China Feihe and Aryzta AG go up and down completely randomly.

Pair Corralation between China Feihe and Aryzta AG

Assuming the 90 days horizon China Feihe Limited is expected to generate 6.69 times more return on investment than Aryzta AG. However, China Feihe is 6.69 times more volatile than Aryzta AG PK. It trades about 0.18 of its potential returns per unit of risk. Aryzta AG PK is currently generating about -0.11 per unit of risk. If you would invest  23.00  in China Feihe Limited on September 6, 2024 and sell it today you would earn a total of  47.00  from holding China Feihe Limited or generate 204.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Feihe Limited  vs.  Aryzta AG PK

 Performance 
       Timeline  
China Feihe Limited 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Feihe Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, China Feihe reported solid returns over the last few months and may actually be approaching a breakup point.
Aryzta AG PK 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aryzta AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Feihe and Aryzta AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Feihe and Aryzta AG

The main advantage of trading using opposite China Feihe and Aryzta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Feihe position performs unexpectedly, Aryzta AG 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 Aryzta AG will offset losses from the drop in Aryzta AG's long position.
The idea behind China Feihe Limited and Aryzta AG PK 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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