Correlation Between Eastroc Beverage and Shandong Huifa

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

By analyzing existing cross correlation between Eastroc Beverage Group and Shandong Huifa Foodstuff, you can compare the effects of market volatilities on Eastroc Beverage and Shandong Huifa 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 Eastroc Beverage with a short position of Shandong Huifa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Shandong Huifa.

Diversification Opportunities for Eastroc Beverage and Shandong Huifa

0.78

Correlation Coefficient

Eastroc Beverage  Shandong Huifa

Poor diversification

The 3 months correlation between Eastroc and Shandong is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Shandong Huifa Foodstuff in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Huifa Foodstuff and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Shandong Huifa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Huifa Foodstuff has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Shandong Huifa go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Shandong Huifa

Assuming the 90 days trading horizon Eastroc Beverage is expected to generate 2.67 times less return on investment than Shandong Huifa. But when comparing it to its historical volatility, Eastroc Beverage Group is 1.81 times less risky than Shandong Huifa. It trades about 0.15 of its potential returns per unit of risk. Shandong Huifa Foodstuff is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  720.00  in Shandong Huifa Foodstuff on September 3, 2024 and sell it today you would earn a total of  441.00  from holding Shandong Huifa Foodstuff or generate 61.25% return on investment over 90 days.

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

Eastroc Beverage Group  vs.  Shandong Huifa Foodstuff

Eastroc Beverage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Huifa Foodstuff

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Eastroc Beverage and Shandong Huifa

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

The idea behind Eastroc Beverage Group and Shandong Huifa Foodstuff 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.