Correlation Between Jinhe Biotechnology and Yili Chuanning

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and Yili Chuanning 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 Jinhe Biotechnology and Yili Chuanning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhe Biotechnology Co and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Jinhe Biotechnology and Yili Chuanning 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 Jinhe Biotechnology with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and Yili Chuanning.

Diversification Opportunities for Jinhe Biotechnology and Yili Chuanning

0.56

Correlation Coefficient

Jinhe Biotechnology  Yili Chuanning

Very weak diversification

The 3 months correlation between Jinhe and Yili is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Jinhe Biotechnology 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 Jinhe Biotechnology Co are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Yili Chuanning go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Yili Chuanning

Assuming the 90 days trading horizon Jinhe Biotechnology is expected to generate 9.35 times less return on investment than Yili Chuanning. But when comparing it to its historical volatility, Jinhe Biotechnology Co is 2.24 times less risky than Yili Chuanning. It trades about 0.02 of its potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,215  in Yili Chuanning Biotechnology on December 1, 2024 and sell it today you would earn a total of  64.00  from holding Yili Chuanning Biotechnology or generate 5.27% return on investment over 90 days.

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

Jinhe Biotechnology Co  vs.  Yili Chuanning Biotechnology

Jinhe Biotechnology

Risk-Adjusted Performance

Very Weak

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

Yili Chuanning Biote

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jinhe Biotechnology and Yili Chuanning

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

The idea behind Jinhe Biotechnology Co and Yili Chuanning Biotechnology 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.