Correlation Between Juewei Food and Xiwang Foodstuffs

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

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

Diversification Opportunities for Juewei Food and Xiwang Foodstuffs

0.93

Correlation Coefficient

Juewei Food  Xiwang Foodstuffs

Almost no diversification

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

Pair Corralation between Juewei Food and Xiwang Foodstuffs

Assuming the 90 days trading horizon Juewei Food Co is expected to under-perform the Xiwang Foodstuffs. But the stock apears to be less risky and, when comparing its historical volatility, Juewei Food Co is 1.05 times less risky than Xiwang Foodstuffs. The stock trades about -0.07 of its potential returns per unit of risk. The Xiwang Foodstuffs Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  503.00  in Xiwang Foodstuffs Co on September 3, 2024 and sell it today you would lose (88.00) from holding Xiwang Foodstuffs Co or give up 17.5% of portfolio value over 90 days.

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

Juewei Food Co  vs.  Xiwang Foodstuffs Co

Juewei Food

Risk-Adjusted Performance

16 of 100

Solid

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.

Xiwang Foodstuffs

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiwang Foodstuffs Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiwang Foodstuffs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Juewei Food and Xiwang Foodstuffs

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

The idea behind Juewei Food Co and Xiwang Foodstuffs 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.