Correlation Between Huasi Agricultural and Jiangsu Yanghe

Can any of the company-specific risk be diversified away by investing in both Huasi Agricultural and Jiangsu Yanghe 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 Huasi Agricultural and Jiangsu Yanghe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huasi Agricultural Development and Jiangsu Yanghe Brewery, you can compare the effects of market volatilities on Huasi Agricultural and Jiangsu Yanghe 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 Huasi Agricultural with a short position of Jiangsu Yanghe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huasi Agricultural and Jiangsu Yanghe.

Diversification Opportunities for Huasi Agricultural and Jiangsu Yanghe

0.65

Correlation Coefficient

Huasi Agricultural  Jiangsu Yanghe

Poor diversification

The 3 months correlation between Huasi and Jiangsu is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Jiangsu Yanghe Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yanghe Brewery and Huasi Agricultural 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 Huasi Agricultural Development are associated (or correlated) with Jiangsu Yanghe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yanghe Brewery has no effect on the direction of Huasi Agricultural i.e., Huasi Agricultural and Jiangsu Yanghe go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Jiangsu Yanghe

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to generate 1.79 times more return on investment than Jiangsu Yanghe. However, Huasi Agricultural is 1.79 times more volatile than Jiangsu Yanghe Brewery. It trades about 0.0 of its potential returns per unit of risk. Jiangsu Yanghe Brewery is currently generating about -0.02 per unit of risk. If you would invest  595.00  in Huasi Agricultural Development on September 14, 2024 and sell it today you would lose (108.00) from holding Huasi Agricultural Development or give up 18.15% of portfolio value over 90 days.

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

Huasi Agricultural Development  vs.  Jiangsu Yanghe Brewery

Huasi Agricultural

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yanghe Brewery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yanghe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huasi Agricultural and Jiangsu Yanghe

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

The idea behind Huasi Agricultural Development and Jiangsu Yanghe Brewery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.