Correlation Between Yeong Guan and Bin Chuan

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

By analyzing existing cross correlation between Yeong Guan Energy and Bin Chuan Enterprise, you can compare the effects of market volatilities on Yeong Guan and Bin Chuan 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 Yeong Guan with a short position of Bin Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yeong Guan and Bin Chuan.

Diversification Opportunities for Yeong Guan and Bin Chuan

-0.62

Correlation Coefficient

Yeong Guan  Bin Chuan

Excellent diversification

The 3 months correlation between Yeong and Bin is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Yeong Guan Energy and Bin Chuan Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bin Chuan Enterprise and Yeong Guan 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 Yeong Guan Energy are associated (or correlated) with Bin Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bin Chuan Enterprise has no effect on the direction of Yeong Guan i.e., Yeong Guan and Bin Chuan go up and down completely randomly.

Pair Corralation between Yeong Guan and Bin Chuan

Assuming the 90 days trading horizon Yeong Guan Energy is expected to under-perform the Bin Chuan. But the stock apears to be less risky and, when comparing its historical volatility, Yeong Guan Energy is 1.38 times less risky than Bin Chuan. The stock trades about -0.04 of its potential returns per unit of risk. The Bin Chuan Enterprise is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,255  in Bin Chuan Enterprise on September 14, 2024 and sell it today you would earn a total of  3,745  from holding Bin Chuan Enterprise or generate 166.08% return on investment over 90 days.

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

Yeong Guan Energy  vs.  Bin Chuan Enterprise

Yeong Guan Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yeong Guan Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Bin Chuan Enterprise

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bin Chuan Enterprise are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bin Chuan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yeong Guan and Bin Chuan

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

The idea behind Yeong Guan Energy and Bin Chuan Enterprise 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.