Correlation Between Torque Lifestyle and China Feihe

Can any of the company-specific risk be diversified away by investing in both Torque Lifestyle and China Feihe 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 Torque Lifestyle and China Feihe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Torque Lifestyle Brands and China Feihe Limited, you can compare the effects of market volatilities on Torque Lifestyle and China Feihe 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 Torque Lifestyle with a short position of China Feihe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torque Lifestyle and China Feihe.

Diversification Opportunities for Torque Lifestyle and China Feihe

-0.46

Correlation Coefficient

Torque Lifestyle  China Feihe

Very good diversification

The 3 months correlation between Torque and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Torque Lifestyle Brands and China Feihe Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Feihe Limited and Torque Lifestyle 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 Torque Lifestyle Brands are associated (or correlated) with China Feihe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Feihe Limited has no effect on the direction of Torque Lifestyle i.e., Torque Lifestyle and China Feihe go up and down completely randomly.

Pair Corralation between Torque Lifestyle and China Feihe

Given the investment horizon of 90 days Torque Lifestyle Brands is expected to generate 2.77 times more return on investment than China Feihe. However, Torque Lifestyle is 2.77 times more volatile than China Feihe Limited. It trades about 0.05 of its potential returns per unit of risk. China Feihe Limited is currently generating about 0.07 per unit of risk. If you would invest  0.95  in Torque Lifestyle Brands on September 9, 2024 and sell it today you would lose (0.78) from holding Torque Lifestyle Brands or give up 82.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Torque Lifestyle Brands  vs.  China Feihe Limited

Torque Lifestyle Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Torque Lifestyle Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Torque Lifestyle sustained solid returns over the last few months and may actually be approaching a breakup point.

China Feihe Limited

Risk-Adjusted Performance

14 of 100

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.

Pair Trading with Torque Lifestyle and China Feihe

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

The idea behind Torque Lifestyle Brands and China Feihe Limited 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.