Correlation Between Levima Advanced and Juewei Food

Can any of the company-specific risk be diversified away by investing in both Levima Advanced and Juewei Food 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 Levima Advanced and Juewei Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Levima Advanced Materials and Juewei Food Co, you can compare the effects of market volatilities on Levima Advanced and Juewei Food 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 Levima Advanced with a short position of Juewei Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levima Advanced and Juewei Food.

Diversification Opportunities for Levima Advanced and Juewei Food

0.93

Correlation Coefficient

Levima Advanced  Juewei Food

Almost no diversification

The 3 months correlation between Levima and Juewei is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Levima Advanced Materials and Juewei Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juewei Food and Levima Advanced 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 Levima Advanced Materials are associated (or correlated) with Juewei Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juewei Food has no effect on the direction of Levima Advanced i.e., Levima Advanced and Juewei Food go up and down completely randomly.

Pair Corralation between Levima Advanced and Juewei Food

Assuming the 90 days trading horizon Levima Advanced is expected to generate 2.3 times less return on investment than Juewei Food. But when comparing it to its historical volatility, Levima Advanced Materials is 1.19 times less risky than Juewei Food. It trades about 0.11 of its potential returns per unit of risk. Juewei Food Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,252  in Juewei Food Co on August 31, 2024 and sell it today you would earn a total of  740.00  from holding Juewei Food Co or generate 59.11% return on investment over 90 days.

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

Levima Advanced Materials  vs.  Juewei Food Co

Levima Advanced Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Levima Advanced Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Levima Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Juewei Food

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Juewei Food Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Juewei Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Levima Advanced and Juewei Food

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

The idea behind Levima Advanced Materials and Juewei Food 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.