Correlation Between Huasi Agricultural and Yonyou Auto

Can any of the company-specific risk be diversified away by investing in both Huasi Agricultural and Yonyou Auto 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 Huasi Agricultural and Yonyou Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huasi Agricultural Development and Yonyou Auto Information, you can compare the effects of market volatilities on Huasi Agricultural and Yonyou Auto 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 Huasi Agricultural with a short position of Yonyou Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huasi Agricultural and Yonyou Auto.

Diversification Opportunities for Huasi Agricultural and Yonyou Auto

0.46

Correlation Coefficient

Huasi Agricultural  Yonyou Auto

Very weak diversification

The 3 months correlation between Huasi and Yonyou is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Yonyou Auto Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yonyou Auto Information and Huasi Agricultural 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 Huasi Agricultural Development are associated (or correlated) with Yonyou Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yonyou Auto Information has no effect on the direction of Huasi Agricultural i.e., Huasi Agricultural and Yonyou Auto go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Yonyou Auto

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to generate 2.26 times more return on investment than Yonyou Auto. However, Huasi Agricultural is 2.26 times more volatile than Yonyou Auto Information. It trades about -0.16 of its potential returns per unit of risk. Yonyou Auto Information is currently generating about -0.6 per unit of risk. If you would invest  468.00  in Huasi Agricultural Development on October 12, 2024 and sell it today you would lose (69.00) from holding Huasi Agricultural Development or give up 14.74% of portfolio value over 90 days.

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

Huasi Agricultural Development  vs.  Yonyou Auto Information

Huasi Agricultural

Risk-Adjusted Performance

6 of 100

OK

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

Yonyou Auto Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yonyou Auto Information 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.

Pair Trading with Huasi Agricultural and Yonyou Auto

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

The idea behind Huasi Agricultural Development and Yonyou Auto Information 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.