Correlation Between Yuan Longping and Juneyao Airlines

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

Diversification Opportunities for Yuan Longping and Juneyao Airlines

0.82

Correlation Coefficient

Yuan Longping  Juneyao Airlines

Very poor diversification

The 3 months correlation between Yuan and Juneyao is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Longping High tech and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines 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 Juneyao Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juneyao Airlines has no effect on the direction of Yuan Longping i.e., Yuan Longping and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Yuan Longping and Juneyao Airlines

Assuming the 90 days trading horizon Yuan Longping High tech is expected to under-perform the Juneyao Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Yuan Longping High tech is 1.71 times less risky than Juneyao Airlines. The stock trades about -0.03 of its potential returns per unit of risk. The Juneyao Airlines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,420  in Juneyao Airlines on September 24, 2024 and sell it today you would earn a total of  7.00  from holding Juneyao Airlines or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Yuan Longping High tech  vs.  Juneyao Airlines

Yuan Longping High

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan Longping High tech are ranked lower than 6 (%) 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.

Juneyao Airlines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Juneyao Airlines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Juneyao Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuan Longping and Juneyao Airlines

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

The idea behind Yuan Longping High tech and Juneyao Airlines 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.