Correlation Between Sichuan Yahua and Gemdale Corp

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

Diversification Opportunities for Sichuan Yahua and Gemdale Corp

-0.37

Correlation Coefficient

Sichuan Yahua  Gemdale Corp

Very good diversification

The 3 months correlation between Sichuan and Gemdale is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Gemdale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemdale Corp 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 Gemdale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemdale Corp has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Gemdale Corp go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Gemdale Corp

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to generate 1.15 times more return on investment than Gemdale Corp. However, Sichuan Yahua is 1.15 times more volatile than Gemdale Corp. It trades about 0.15 of its potential returns per unit of risk. Gemdale Corp is currently generating about 0.02 per unit of risk. If you would invest  1,216  in Sichuan Yahua Industrial on October 25, 2024 and sell it today you would earn a total of  109.00  from holding Sichuan Yahua Industrial or generate 8.96% return on investment over 90 days.

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

Sichuan Yahua Industrial  vs.  Gemdale Corp

Sichuan Yahua Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 11 (%) 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.

Gemdale Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemdale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sichuan Yahua and Gemdale Corp

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

The idea behind Sichuan Yahua Industrial and Gemdale Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.