Correlation Between Gan Yuan and HaiXin Foods

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

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

Diversification Opportunities for Gan Yuan and HaiXin Foods

0.88

Correlation Coefficient

Gan Yuan  HaiXin Foods

Very poor diversification

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

Pair Corralation between Gan Yuan and HaiXin Foods

Assuming the 90 days trading horizon Gan Yuan is expected to generate 1.4 times less return on investment than HaiXin Foods. But when comparing it to its historical volatility, Gan Yuan Foods is 1.17 times less risky than HaiXin Foods. It trades about 0.31 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  298.00  in HaiXin Foods Co on September 14, 2024 and sell it today you would earn a total of  351.00  from holding HaiXin Foods Co or generate 117.79% return on investment over 90 days.

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

Gan Yuan Foods  vs.  HaiXin Foods Co

Gan Yuan Foods

Risk-Adjusted Performance

24 of 100

Solid

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

HaiXin Foods

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 28 (%) 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.

Pair Trading with Gan Yuan and HaiXin Foods

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

The idea behind Gan Yuan Foods and HaiXin Foods Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.