Correlation Between Jiugui Liquor and Zhejiang Yayi

Can any of the company-specific risk be diversified away by investing in both Jiugui Liquor and Zhejiang Yayi 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 Jiugui Liquor and Zhejiang Yayi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiugui Liquor Co and Zhejiang Yayi Metal, you can compare the effects of market volatilities on Jiugui Liquor and Zhejiang Yayi 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 Jiugui Liquor with a short position of Zhejiang Yayi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Zhejiang Yayi.

Diversification Opportunities for Jiugui Liquor and Zhejiang Yayi

0.71

Correlation Coefficient

Jiugui Liquor  Zhejiang Yayi

Poor diversification

The 3 months correlation between Jiugui and Zhejiang is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Zhejiang Yayi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Yayi Metal and Jiugui Liquor 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 Jiugui Liquor Co are associated (or correlated) with Zhejiang Yayi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Yayi Metal has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Zhejiang Yayi go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Zhejiang Yayi

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Zhejiang Yayi. But the stock apears to be less risky and, when comparing its historical volatility, Jiugui Liquor Co is 1.27 times less risky than Zhejiang Yayi. The stock trades about -0.14 of its potential returns per unit of risk. The Zhejiang Yayi Metal is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,664  in Zhejiang Yayi Metal on December 7, 2024 and sell it today you would lose (126.00) from holding Zhejiang Yayi Metal or give up 4.73% of portfolio value over 90 days.

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

Jiugui Liquor Co  vs.  Zhejiang Yayi Metal

Jiugui Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiugui Liquor 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhejiang Yayi Metal

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jiugui Liquor and Zhejiang Yayi

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

The idea behind Jiugui Liquor Co and Zhejiang Yayi Metal 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.