Correlation Between HaiXin Foods and Qijing Machinery

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

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

Diversification Opportunities for HaiXin Foods and Qijing Machinery

0.88

Correlation Coefficient

HaiXin Foods  Qijing Machinery

Very poor diversification

The 3 months correlation between HaiXin and Qijing is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HaiXin Foods Co and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery and HaiXin 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 HaiXin Foods Co are associated (or correlated) with Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of HaiXin Foods i.e., HaiXin Foods and Qijing Machinery go up and down completely randomly.

Pair Corralation between HaiXin Foods and Qijing Machinery

Assuming the 90 days trading horizon HaiXin Foods Co is expected to generate 1.24 times more return on investment than Qijing Machinery. However, HaiXin Foods is 1.24 times more volatile than Qijing Machinery. It trades about 0.32 of its potential returns per unit of risk. Qijing Machinery is currently generating about 0.19 per unit of risk. If you would invest  307.00  in HaiXin Foods Co on September 12, 2024 and sell it today you would earn a total of  283.00  from holding HaiXin Foods Co or generate 92.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

HaiXin Foods Co  vs.  Qijing Machinery

HaiXin Foods

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Qijing Machinery

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HaiXin Foods and Qijing Machinery

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

The idea behind HaiXin Foods Co and Qijing Machinery 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.