Correlation Between Histeel and YeSUN Tech

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

By analyzing existing cross correlation between Histeel and YeSUN Tech CoLtd, you can compare the effects of market volatilities on Histeel and YeSUN Tech 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 Histeel with a short position of YeSUN Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Histeel and YeSUN Tech.

Diversification Opportunities for Histeel and YeSUN Tech

0.78

Correlation Coefficient

Histeel  YeSUN Tech

Poor diversification

The 3 months correlation between Histeel and YeSUN is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Histeel and YeSUN Tech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YeSUN Tech CoLtd and Histeel 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 Histeel are associated (or correlated) with YeSUN Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YeSUN Tech CoLtd has no effect on the direction of Histeel i.e., Histeel and YeSUN Tech go up and down completely randomly.

Pair Corralation between Histeel and YeSUN Tech

Assuming the 90 days trading horizon Histeel is expected to generate 0.66 times more return on investment than YeSUN Tech. However, Histeel is 1.52 times less risky than YeSUN Tech. It trades about -0.03 of its potential returns per unit of risk. YeSUN Tech CoLtd is currently generating about -0.05 per unit of risk. If you would invest  317,000  in Histeel on September 15, 2024 and sell it today you would lose (30,500) from holding Histeel or give up 9.62% of portfolio value over 90 days.

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

Histeel  vs.  YeSUN Tech CoLtd

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel 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.

YeSUN Tech CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YeSUN Tech CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Histeel and YeSUN Tech

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

The idea behind Histeel and YeSUN Tech CoLtd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.