Correlation Between Chengdu Xingrong and Sichuan Yahua

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

By analyzing existing cross correlation between Chengdu Xingrong Investment and Sichuan Yahua Industrial, you can compare the effects of market volatilities on Chengdu Xingrong and Sichuan Yahua 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 Chengdu Xingrong with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xingrong and Sichuan Yahua.

Diversification Opportunities for Chengdu Xingrong and Sichuan Yahua

-0.34

Correlation Coefficient

Chengdu Xingrong  Sichuan Yahua

Very good diversification

The 3 months correlation between Chengdu and Sichuan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xingrong Investment and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and Chengdu Xingrong 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 Chengdu Xingrong Investment are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of Chengdu Xingrong i.e., Chengdu Xingrong and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Chengdu Xingrong and Sichuan Yahua

Assuming the 90 days trading horizon Chengdu Xingrong Investment is expected to under-perform the Sichuan Yahua. But the stock apears to be less risky and, when comparing its historical volatility, Chengdu Xingrong Investment is 1.79 times less risky than Sichuan Yahua. The stock trades about -0.12 of its potential returns per unit of risk. The Sichuan Yahua Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Sichuan Yahua Industrial on December 25, 2024 and sell it today you would earn a total of  107.00  from holding Sichuan Yahua Industrial or generate 8.99% return on investment over 90 days.

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

Chengdu Xingrong Investment  vs.  Sichuan Yahua Industrial

Chengdu Xingrong Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chengdu Xingrong Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sichuan Yahua Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chengdu Xingrong and Sichuan Yahua

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

The idea behind Chengdu Xingrong Investment and Sichuan Yahua Industrial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.