Correlation Between Chongqing Brewery and JuneYao Dairy

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

Diversification Opportunities for Chongqing Brewery and JuneYao Dairy

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chongqing and JuneYao is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Brewery Co and JuneYao Dairy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JuneYao Dairy and Chongqing Brewery 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 Chongqing Brewery Co are associated (or correlated) with JuneYao Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JuneYao Dairy has no effect on the direction of Chongqing Brewery i.e., Chongqing Brewery and JuneYao Dairy go up and down completely randomly.

Pair Corralation between Chongqing Brewery and JuneYao Dairy

Assuming the 90 days trading horizon Chongqing Brewery is expected to generate 1.94 times less return on investment than JuneYao Dairy. But when comparing it to its historical volatility, Chongqing Brewery Co is 2.61 times less risky than JuneYao Dairy. It trades about 0.14 of its potential returns per unit of risk. JuneYao Dairy Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  595.00  in JuneYao Dairy Co on September 26, 2024 and sell it today you would earn a total of  57.00  from holding JuneYao Dairy Co or generate 9.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chongqing Brewery Co  vs.  JuneYao Dairy Co

 Performance 
       Timeline  
Chongqing Brewery 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Brewery Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Brewery may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JuneYao Dairy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JuneYao Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Brewery and JuneYao Dairy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chongqing Brewery and JuneYao Dairy

The main advantage of trading using opposite Chongqing Brewery and JuneYao Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Brewery position performs unexpectedly, JuneYao Dairy 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 JuneYao Dairy will offset losses from the drop in JuneYao Dairy's long position.
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The idea behind Chongqing Brewery Co and JuneYao Dairy 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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