Correlation Between ShenZhen YUTO and Shanghai Yaoji

Can any of the company-specific risk be diversified away by investing in both ShenZhen YUTO and Shanghai Yaoji 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 ShenZhen YUTO and Shanghai Yaoji into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ShenZhen YUTO Packaging and Shanghai Yaoji Playing, you can compare the effects of market volatilities on ShenZhen YUTO and Shanghai Yaoji 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 ShenZhen YUTO with a short position of Shanghai Yaoji. Check out your portfolio center. Please also check ongoing floating volatility patterns of ShenZhen YUTO and Shanghai Yaoji.

Diversification Opportunities for ShenZhen YUTO and Shanghai Yaoji

-0.34

Correlation Coefficient

ShenZhen YUTO  Shanghai Yaoji

Very good diversification

The 3 months correlation between ShenZhen and Shanghai is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ShenZhen YUTO Packaging and Shanghai Yaoji Playing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yaoji Playing and ShenZhen YUTO 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 ShenZhen YUTO Packaging are associated (or correlated) with Shanghai Yaoji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yaoji Playing has no effect on the direction of ShenZhen YUTO i.e., ShenZhen YUTO and Shanghai Yaoji go up and down completely randomly.

Pair Corralation between ShenZhen YUTO and Shanghai Yaoji

Assuming the 90 days trading horizon ShenZhen YUTO Packaging is expected to under-perform the Shanghai Yaoji. But the stock apears to be less risky and, when comparing its historical volatility, ShenZhen YUTO Packaging is 2.38 times less risky than Shanghai Yaoji. The stock trades about -0.11 of its potential returns per unit of risk. The Shanghai Yaoji Playing is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,734  in Shanghai Yaoji Playing on December 27, 2024 and sell it today you would earn a total of  8.00  from holding Shanghai Yaoji Playing or generate 0.29% return on investment over 90 days.

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

ShenZhen YUTO Packaging  vs.  Shanghai Yaoji Playing

ShenZhen YUTO Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days ShenZhen YUTO Packaging 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.

Shanghai Yaoji Playing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Yaoji is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ShenZhen YUTO and Shanghai Yaoji

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

The idea behind ShenZhen YUTO Packaging and Shanghai Yaoji Playing 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.