Correlation Between Sichuan Yahua and Dook Media

Can any of the company-specific risk be diversified away by investing in both Sichuan Yahua and Dook Media 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 Sichuan Yahua and Dook Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Yahua Industrial and Dook Media Group, you can compare the effects of market volatilities on Sichuan Yahua and Dook Media 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 Sichuan Yahua with a short position of Dook Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Yahua and Dook Media.

Diversification Opportunities for Sichuan Yahua and Dook Media

0.77

Correlation Coefficient

Sichuan Yahua  Dook Media

Poor diversification

The 3 months correlation between Sichuan and Dook is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Dook Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dook Media Group and Sichuan Yahua 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 Sichuan Yahua Industrial are associated (or correlated) with Dook Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dook Media Group has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Dook Media go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Dook Media

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to generate 0.84 times more return on investment than Dook Media. However, Sichuan Yahua Industrial is 1.19 times less risky than Dook Media. It trades about 0.05 of its potential returns per unit of risk. Dook Media Group is currently generating about -0.21 per unit of risk. If you would invest  1,189  in Sichuan Yahua Industrial on September 30, 2024 and sell it today you would earn a total of  27.00  from holding Sichuan Yahua Industrial or generate 2.27% return on investment over 90 days.

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

Sichuan Yahua Industrial  vs.  Dook Media Group

Sichuan Yahua Industrial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua sustained solid returns over the last few months and may actually be approaching a breakup point.

Dook Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sichuan Yahua and Dook Media

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

The idea behind Sichuan Yahua Industrial and Dook Media Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.