Correlation Between Jinhe Biotechnology and Youyou Foods

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

Diversification Opportunities for Jinhe Biotechnology and Youyou Foods

0.68

Correlation Coefficient

Jinhe Biotechnology  Youyou Foods

Poor diversification

The 3 months correlation between Jinhe and Youyou is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Youyou Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youyou Foods 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 Youyou Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youyou Foods has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Youyou Foods go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Youyou Foods

Assuming the 90 days trading horizon Jinhe Biotechnology Co is expected to under-perform the Youyou Foods. But the stock apears to be less risky and, when comparing its historical volatility, Jinhe Biotechnology Co is 1.27 times less risky than Youyou Foods. The stock trades about -0.01 of its potential returns per unit of risk. The Youyou Foods Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  773.00  in Youyou Foods Co on October 11, 2024 and sell it today you would earn a total of  239.00  from holding Youyou Foods Co or generate 30.92% return on investment over 90 days.

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

Jinhe Biotechnology Co  vs.  Youyou Foods Co

Jinhe Biotechnology

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhe Biotechnology Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Youyou Foods

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Youyou Foods Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youyou Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinhe Biotechnology and Youyou Foods

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

The idea behind Jinhe Biotechnology Co and Youyou Foods Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.