Correlation Between Jiahe Foods and Sichuan Teway

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

By analyzing existing cross correlation between Jiahe Foods Industry and Sichuan Teway Food, you can compare the effects of market volatilities on Jiahe Foods and Sichuan Teway 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 Jiahe Foods with a short position of Sichuan Teway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiahe Foods and Sichuan Teway.

Diversification Opportunities for Jiahe Foods and Sichuan Teway

0.75

Correlation Coefficient

Jiahe Foods  Sichuan Teway

Poor diversification

The 3 months correlation between Jiahe and Sichuan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jiahe Foods Industry and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food and Jiahe 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 Jiahe Foods Industry are associated (or correlated) with Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of Jiahe Foods i.e., Jiahe Foods and Sichuan Teway go up and down completely randomly.

Pair Corralation between Jiahe Foods and Sichuan Teway

Assuming the 90 days trading horizon Jiahe Foods is expected to generate 1.08 times less return on investment than Sichuan Teway. In addition to that, Jiahe Foods is 1.06 times more volatile than Sichuan Teway Food. It trades about 0.2 of its total potential returns per unit of risk. Sichuan Teway Food is currently generating about 0.23 per unit of volatility. If you would invest  921.00  in Sichuan Teway Food on September 2, 2024 and sell it today you would earn a total of  461.00  from holding Sichuan Teway Food or generate 50.05% return on investment over 90 days.

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

Jiahe Foods Industry  vs.  Sichuan Teway Food

Jiahe Foods Industry

Risk-Adjusted Performance

15 of 100

Good

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

Sichuan Teway Food

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Jiahe Foods and Sichuan Teway

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

The idea behind Jiahe Foods Industry and Sichuan Teway Food 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.