Correlation Between Sichuan Yahua and Zhejiang Daily

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

Diversification Opportunities for Sichuan Yahua and Zhejiang Daily

0.76

Correlation Coefficient

Sichuan Yahua  Zhejiang Daily

Poor diversification

The 3 months correlation between Sichuan and Zhejiang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media 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 Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Zhejiang Daily go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Zhejiang Daily

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to under-perform the Zhejiang Daily. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Yahua Industrial is 1.33 times less risky than Zhejiang Daily. The stock trades about -0.05 of its potential returns per unit of risk. The Zhejiang Daily Media is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Zhejiang Daily Media on October 4, 2024 and sell it today you would earn a total of  215.00  from holding Zhejiang Daily Media or generate 25.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Sichuan Yahua Industrial  vs.  Zhejiang Daily Media

Sichuan Yahua Industrial

Risk-Adjusted Performance

0 of 100

Weak

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

Zhejiang Daily Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Daily Media 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 Sichuan Yahua and Zhejiang Daily

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

The idea behind Sichuan Yahua Industrial and Zhejiang Daily Media 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.