Correlation Between Risesun Real and Wuhan Yangtze

Can any of the company-specific risk be diversified away by investing in both Risesun Real and Wuhan Yangtze 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 Risesun Real and Wuhan Yangtze into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Risesun Real Estate and Wuhan Yangtze Communication, you can compare the effects of market volatilities on Risesun Real and Wuhan Yangtze 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 Risesun Real with a short position of Wuhan Yangtze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Risesun Real and Wuhan Yangtze.

Diversification Opportunities for Risesun Real and Wuhan Yangtze

0.64

Correlation Coefficient

Risesun Real  Wuhan Yangtze

Poor diversification

The 3 months correlation between Risesun and Wuhan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Risesun Real Estate and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun and Risesun Real 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 Risesun Real Estate are associated (or correlated) with Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Risesun Real i.e., Risesun Real and Wuhan Yangtze go up and down completely randomly.

Pair Corralation between Risesun Real and Wuhan Yangtze

Assuming the 90 days trading horizon Risesun Real Estate is expected to under-perform the Wuhan Yangtze. But the stock apears to be less risky and, when comparing its historical volatility, Risesun Real Estate is 1.07 times less risky than Wuhan Yangtze. The stock trades about -0.32 of its potential returns per unit of risk. The Wuhan Yangtze Communication is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Wuhan Yangtze Communication on October 22, 2024 and sell it today you would lose (120.00) from holding Wuhan Yangtze Communication or give up 5.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Risesun Real Estate  vs.  Wuhan Yangtze Communication

Risesun Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Risesun Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Risesun Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wuhan Yangtze Commun

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Risesun Real and Wuhan Yangtze

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

The idea behind Risesun Real Estate and Wuhan Yangtze Communication 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.