Correlation Between Flowers Foods and DONGJIANG ENVIRONMENTAL

Can any of the company-specific risk be diversified away by investing in both Flowers Foods and DONGJIANG ENVIRONMENTAL 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 Flowers Foods and DONGJIANG ENVIRONMENTAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flowers Foods and DONGJIANG ENVIRONMENTAL H, you can compare the effects of market volatilities on Flowers Foods and DONGJIANG ENVIRONMENTAL 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 Flowers Foods with a short position of DONGJIANG ENVIRONMENTAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowers Foods and DONGJIANG ENVIRONMENTAL.

Diversification Opportunities for Flowers Foods and DONGJIANG ENVIRONMENTAL

0.29

Correlation Coefficient

Flowers Foods  DONGJIANG ENVIRONMENTAL

Modest diversification

The 3 months correlation between Flowers and DONGJIANG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods and DONGJIANG ENVIRONMENTAL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGJIANG ENVIRONMENTAL and Flowers 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 Flowers Foods are associated (or correlated) with DONGJIANG ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGJIANG ENVIRONMENTAL has no effect on the direction of Flowers Foods i.e., Flowers Foods and DONGJIANG ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Flowers Foods and DONGJIANG ENVIRONMENTAL

Assuming the 90 days horizon Flowers Foods is expected to under-perform the DONGJIANG ENVIRONMENTAL. But the stock apears to be less risky and, when comparing its historical volatility, Flowers Foods is 5.09 times less risky than DONGJIANG ENVIRONMENTAL. The stock trades about -0.12 of its potential returns per unit of risk. The DONGJIANG ENVIRONMENTAL H is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  22.00  in DONGJIANG ENVIRONMENTAL H on December 22, 2024 and sell it today you would lose (1.00) from holding DONGJIANG ENVIRONMENTAL H or give up 4.55% of portfolio value over 90 days.

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

Flowers Foods  vs.  DONGJIANG ENVIRONMENTAL H

Flowers Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flowers Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DONGJIANG ENVIRONMENTAL H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DONGJIANG ENVIRONMENTAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flowers Foods and DONGJIANG ENVIRONMENTAL

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

The idea behind Flowers Foods and DONGJIANG ENVIRONMENTAL H 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.