Correlation Between Ligao Foods and HaiXin Foods

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Can any of the company-specific risk be diversified away by investing in both Ligao Foods and HaiXin Foods 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 Ligao Foods and HaiXin Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ligao Foods CoLtd and HaiXin Foods Co, you can compare the effects of market volatilities on Ligao Foods and HaiXin Foods 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 Ligao Foods with a short position of HaiXin Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligao Foods and HaiXin Foods.

Diversification Opportunities for Ligao Foods and HaiXin Foods

0.9
  Correlation Coefficient

Almost no diversification

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

Pair Corralation between Ligao Foods and HaiXin Foods

Assuming the 90 days trading horizon Ligao Foods CoLtd is expected to under-perform the HaiXin Foods. But the stock apears to be less risky and, when comparing its historical volatility, Ligao Foods CoLtd is 1.29 times less risky than HaiXin Foods. The stock trades about -0.09 of its potential returns per unit of risk. The HaiXin Foods Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  363.00  in HaiXin Foods Co on August 25, 2024 and sell it today you would earn a total of  40.00  from holding HaiXin Foods Co or generate 11.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ligao Foods CoLtd  vs.  HaiXin Foods Co

 Performance 
       Timeline  
Ligao Foods CoLtd 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.
HaiXin Foods 

Risk-Adjusted Performance

11 of 100

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

Ligao Foods and HaiXin Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ligao Foods and HaiXin Foods

The main advantage of trading using opposite Ligao Foods and HaiXin Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ligao Foods position performs unexpectedly, HaiXin Foods 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 HaiXin Foods will offset losses from the drop in HaiXin Foods' long position.
The idea behind Ligao Foods CoLtd and HaiXin Foods 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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