Correlation Between ShenZhen YUTO and Elite Color

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

Diversification Opportunities for ShenZhen YUTO and Elite Color

0.09

Correlation Coefficient

ShenZhen YUTO  Elite Color

Significant diversification

The 3 months correlation between ShenZhen and Elite is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ShenZhen YUTO Packaging and Elite Color Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Color Environmental 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 Elite Color. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Color Environmental has no effect on the direction of ShenZhen YUTO i.e., ShenZhen YUTO and Elite Color go up and down completely randomly.

Pair Corralation between ShenZhen YUTO and Elite Color

Assuming the 90 days trading horizon ShenZhen YUTO Packaging is expected to generate 0.61 times more return on investment than Elite Color. However, ShenZhen YUTO Packaging is 1.63 times less risky than Elite Color. It trades about 0.11 of its potential returns per unit of risk. Elite Color Environmental is currently generating about 0.05 per unit of risk. If you would invest  2,390  in ShenZhen YUTO Packaging on October 11, 2024 and sell it today you would earn a total of  276.00  from holding ShenZhen YUTO Packaging or generate 11.55% return on investment over 90 days.

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

ShenZhen YUTO Packaging  vs.  Elite Color Environmental

ShenZhen YUTO Packaging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ShenZhen YUTO Packaging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ShenZhen YUTO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elite Color Environmental

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elite Color may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ShenZhen YUTO and Elite Color

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

The idea behind ShenZhen YUTO Packaging and Elite Color Environmental 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 Transaction History module to view history of all your transactions and understand their impact on performance.