Correlation Between Weichai Heavy and Yes Optoelectronics

Can any of the company-specific risk be diversified away by investing in both Weichai Heavy and Yes Optoelectronics 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 Weichai Heavy and Yes Optoelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weichai Heavy Machinery and Yes Optoelectronics Co, you can compare the effects of market volatilities on Weichai Heavy and Yes Optoelectronics 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 Weichai Heavy with a short position of Yes Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Heavy and Yes Optoelectronics.

Diversification Opportunities for Weichai Heavy and Yes Optoelectronics

0.19

Correlation Coefficient

Weichai Heavy  Yes Optoelectronics

Average diversification

The 3 months correlation between Weichai and Yes is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Heavy Machinery and Yes Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yes Optoelectronics and Weichai Heavy 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 Weichai Heavy Machinery are associated (or correlated) with Yes Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yes Optoelectronics has no effect on the direction of Weichai Heavy i.e., Weichai Heavy and Yes Optoelectronics go up and down completely randomly.

Pair Corralation between Weichai Heavy and Yes Optoelectronics

Assuming the 90 days trading horizon Weichai Heavy Machinery is expected to generate 1.12 times more return on investment than Yes Optoelectronics. However, Weichai Heavy is 1.12 times more volatile than Yes Optoelectronics Co. It trades about 0.15 of its potential returns per unit of risk. Yes Optoelectronics Co is currently generating about 0.04 per unit of risk. If you would invest  1,124  in Weichai Heavy Machinery on October 7, 2024 and sell it today you would earn a total of  526.00  from holding Weichai Heavy Machinery or generate 46.8% return on investment over 90 days.

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

Weichai Heavy Machinery  vs.  Yes Optoelectronics Co

Weichai Heavy Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weichai Heavy Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weichai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Yes Optoelectronics

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Weichai Heavy and Yes Optoelectronics

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

The idea behind Weichai Heavy Machinery and Yes Optoelectronics 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.