Correlation Between Yuan Longping and Zhejiang Juhua

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

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

Diversification Opportunities for Yuan Longping and Zhejiang Juhua

0.92

Correlation Coefficient

Yuan Longping  Zhejiang Juhua

Almost no diversification

The 3 months correlation between Yuan and Zhejiang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Longping High tech and Zhejiang Juhua Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Juhua and Yuan Longping 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 Yuan Longping High tech are associated (or correlated) with Zhejiang Juhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Juhua has no effect on the direction of Yuan Longping i.e., Yuan Longping and Zhejiang Juhua go up and down completely randomly.

Pair Corralation between Yuan Longping and Zhejiang Juhua

Assuming the 90 days trading horizon Yuan Longping High tech is expected to under-perform the Zhejiang Juhua. But the stock apears to be less risky and, when comparing its historical volatility, Yuan Longping High tech is 1.34 times less risky than Zhejiang Juhua. The stock trades about -0.03 of its potential returns per unit of risk. The Zhejiang Juhua Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,618  in Zhejiang Juhua Co on September 20, 2024 and sell it today you would earn a total of  557.00  from holding Zhejiang Juhua Co or generate 34.43% return on investment over 90 days.

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

Yuan Longping High tech  vs.  Zhejiang Juhua Co

Yuan Longping High

Risk-Adjusted Performance

11 of 100

Good

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

Zhejiang Juhua

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuan Longping and Zhejiang Juhua

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

The idea behind Yuan Longping High tech and Zhejiang Juhua 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.