Correlation Between Cangzhou Mingzhu and Yili Chuanning

Can any of the company-specific risk be diversified away by investing in both Cangzhou Mingzhu and Yili Chuanning 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 Cangzhou Mingzhu and Yili Chuanning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cangzhou Mingzhu Plastic and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Cangzhou Mingzhu and Yili Chuanning 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 Cangzhou Mingzhu with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cangzhou Mingzhu and Yili Chuanning.

Diversification Opportunities for Cangzhou Mingzhu and Yili Chuanning

0.15

Correlation Coefficient

Cangzhou Mingzhu  Yili Chuanning

Average diversification

The 3 months correlation between Cangzhou and Yili is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cangzhou Mingzhu Plastic and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Cangzhou Mingzhu 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 Cangzhou Mingzhu Plastic are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Cangzhou Mingzhu i.e., Cangzhou Mingzhu and Yili Chuanning go up and down completely randomly.

Pair Corralation between Cangzhou Mingzhu and Yili Chuanning

Assuming the 90 days trading horizon Cangzhou Mingzhu Plastic is expected to generate 0.78 times more return on investment than Yili Chuanning. However, Cangzhou Mingzhu Plastic is 1.28 times less risky than Yili Chuanning. It trades about 0.01 of its potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about -0.02 per unit of risk. If you would invest  349.00  in Cangzhou Mingzhu Plastic on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Cangzhou Mingzhu Plastic or generate 0.0% return on investment over 90 days.

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

Cangzhou Mingzhu Plastic  vs.  Yili Chuanning Biotechnology

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Yili Chuanning Biote

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cangzhou Mingzhu and Yili Chuanning

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

The idea behind Cangzhou Mingzhu Plastic and Yili Chuanning Biotechnology 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.