Correlation Between Yes Optoelectronics and Sinosteel Engineering

Can any of the company-specific risk be diversified away by investing in both Yes Optoelectronics and Sinosteel Engineering 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 Yes Optoelectronics and Sinosteel Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Yes Optoelectronics and Sinosteel Engineering

0.49

Correlation Coefficient

Yes Optoelectronics  Sinosteel Engineering

Very weak diversification

The 3 months correlation between Yes and Sinosteel is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Yes Optoelectronics Co and Sinosteel Engineering and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Engineering and and Yes Optoelectronics 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 Yes Optoelectronics Co are associated (or correlated) with Sinosteel Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Engineering and has no effect on the direction of Yes Optoelectronics i.e., Yes Optoelectronics and Sinosteel Engineering go up and down completely randomly.

Pair Corralation between Yes Optoelectronics and Sinosteel Engineering

Assuming the 90 days trading horizon Yes Optoelectronics Co is expected to generate 2.41 times more return on investment than Sinosteel Engineering. However, Yes Optoelectronics is 2.41 times more volatile than Sinosteel Engineering and. It trades about -0.04 of its potential returns per unit of risk. Sinosteel Engineering and is currently generating about -0.42 per unit of risk. If you would invest  2,667  in Yes Optoelectronics Co on October 5, 2024 and sell it today you would lose (107.00) from holding Yes Optoelectronics Co or give up 4.01% of portfolio value over 90 days.

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

Yes Optoelectronics Co  vs.  Sinosteel Engineering and

Yes Optoelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinosteel Engineering and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinosteel Engineering and 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 Yes Optoelectronics and Sinosteel Engineering

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

The idea behind Yes Optoelectronics Co and Sinosteel Engineering and 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.