Correlation Between Yuan Longping and Metro Investment

Can any of the company-specific risk be diversified away by investing in both Yuan Longping and Metro Investment 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 Metro Investment 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 Metro Investment Development, you can compare the effects of market volatilities on Yuan Longping and Metro Investment 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 Metro Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Longping and Metro Investment.

Diversification Opportunities for Yuan Longping and Metro Investment

0.69

Correlation Coefficient

Yuan Longping  Metro Investment

Poor diversification

The 3 months correlation between Yuan and Metro is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Longping High tech and Metro Investment Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Investment Dev 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 Metro Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Investment Dev has no effect on the direction of Yuan Longping i.e., Yuan Longping and Metro Investment go up and down completely randomly.

Pair Corralation between Yuan Longping and Metro Investment

Assuming the 90 days trading horizon Yuan Longping High tech is expected to under-perform the Metro Investment. But the stock apears to be less risky and, when comparing its historical volatility, Yuan Longping High tech is 1.49 times less risky than Metro Investment. The stock trades about -0.11 of its potential returns per unit of risk. The Metro Investment Development is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Metro Investment Development on December 29, 2024 and sell it today you would lose (7.00) from holding Metro Investment Development or give up 1.82% of portfolio value over 90 days.

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

Yuan Longping High tech  vs.  Metro Investment Development

Yuan Longping High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yuan Longping High tech 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.

Metro Investment Dev

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Yuan Longping and Metro Investment

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

The idea behind Yuan Longping High tech and Metro Investment Development 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.