Correlation Between Zhejiang Juhua and Shandong Sino-Agri

Can any of the company-specific risk be diversified away by investing in both Zhejiang Juhua and Shandong Sino-Agri 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 Zhejiang Juhua and Shandong Sino-Agri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Juhua Co and Shandong Sino Agri United, you can compare the effects of market volatilities on Zhejiang Juhua and Shandong Sino-Agri 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 Zhejiang Juhua with a short position of Shandong Sino-Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Juhua and Shandong Sino-Agri.

Diversification Opportunities for Zhejiang Juhua and Shandong Sino-Agri

0.9

Correlation Coefficient

Zhejiang Juhua  Shandong Sino-Agri

Almost no diversification

The 3 months correlation between Zhejiang and Shandong is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Shandong Sino Agri United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sino Agri and Zhejiang Juhua 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 Zhejiang Juhua Co are associated (or correlated) with Shandong Sino-Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sino Agri has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Shandong Sino-Agri go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Shandong Sino-Agri

Assuming the 90 days trading horizon Zhejiang Juhua is expected to generate 1.26 times less return on investment than Shandong Sino-Agri. But when comparing it to its historical volatility, Zhejiang Juhua Co is 1.24 times less risky than Shandong Sino-Agri. It trades about 0.22 of its potential returns per unit of risk. Shandong Sino Agri United is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,139  in Shandong Sino Agri United on September 2, 2024 and sell it today you would earn a total of  658.00  from holding Shandong Sino Agri United or generate 57.77% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Shandong Sino Agri United

Zhejiang Juhua

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Sino Agri

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sino Agri United are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sino-Agri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Juhua and Shandong Sino-Agri

The main advantage of trading using opposite Zhejiang Juhua and Shandong Sino-Agri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Juhua position performs unexpectedly, Shandong Sino-Agri 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 Shandong Sino-Agri will offset losses from the drop in Shandong Sino-Agri's long position.

The idea behind Zhejiang Juhua Co and Shandong Sino Agri United 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.