Correlation Between Changjiang Publishing and Ligao Foods

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

Diversification Opportunities for Changjiang Publishing and Ligao Foods

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Changjiang and Ligao is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Publishing Media and Ligao Foods CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligao Foods CoLtd and Changjiang Publishing 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 Changjiang Publishing Media are associated (or correlated) with Ligao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligao Foods CoLtd has no effect on the direction of Changjiang Publishing i.e., Changjiang Publishing and Ligao Foods go up and down completely randomly.

Pair Corralation between Changjiang Publishing and Ligao Foods

Assuming the 90 days trading horizon Changjiang Publishing Media is expected to generate 0.6 times more return on investment than Ligao Foods. However, Changjiang Publishing Media is 1.65 times less risky than Ligao Foods. It trades about -0.16 of its potential returns per unit of risk. Ligao Foods CoLtd is currently generating about -0.12 per unit of risk. If you would invest  932.00  in Changjiang Publishing Media on October 26, 2024 and sell it today you would lose (59.00) from holding Changjiang Publishing Media or give up 6.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Changjiang Publishing Media  vs.  Ligao Foods CoLtd

 Performance 
       Timeline  
Changjiang Publishing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Changjiang Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changjiang Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Ligao Foods CoLtd 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Changjiang Publishing and Ligao Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changjiang Publishing and Ligao Foods

The main advantage of trading using opposite Changjiang Publishing and Ligao Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changjiang Publishing position performs unexpectedly, Ligao 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 Ligao Foods will offset losses from the drop in Ligao Foods' long position.
The idea behind Changjiang Publishing Media and Ligao Foods CoLtd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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