Correlation Between Chongqing Changan and Wuliangye Yibin

Can any of the company-specific risk be diversified away by investing in both Chongqing Changan and Wuliangye Yibin 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 Changan and Wuliangye Yibin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Changan Automobile and Wuliangye Yibin Co, you can compare the effects of market volatilities on Chongqing Changan and Wuliangye Yibin 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 Changan with a short position of Wuliangye Yibin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Wuliangye Yibin.

Diversification Opportunities for Chongqing Changan and Wuliangye Yibin

0.38

Correlation Coefficient

Chongqing Changan  Wuliangye Yibin

Weak diversification

The 3 months correlation between Chongqing and Wuliangye is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Wuliangye Yibin Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuliangye Yibin and Chongqing Changan 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 Changan Automobile are associated (or correlated) with Wuliangye Yibin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuliangye Yibin has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and Wuliangye Yibin go up and down completely randomly.

Pair Corralation between Chongqing Changan and Wuliangye Yibin

Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to generate 1.26 times more return on investment than Wuliangye Yibin. However, Chongqing Changan is 1.26 times more volatile than Wuliangye Yibin Co. It trades about -0.03 of its potential returns per unit of risk. Wuliangye Yibin Co is currently generating about -0.12 per unit of risk. If you would invest  1,367  in Chongqing Changan Automobile on October 10, 2024 and sell it today you would lose (82.00) from holding Chongqing Changan Automobile or give up 6.0% of portfolio value over 90 days.

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

Chongqing Changan Automobile  vs.  Wuliangye Yibin Co

Chongqing Changan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Changan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wuliangye Yibin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuliangye Yibin Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chongqing Changan and Wuliangye Yibin

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

The idea behind Chongqing Changan Automobile and Wuliangye Yibin 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.