Correlation Between Yuan Jen and China Man

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

By analyzing existing cross correlation between Yuan Jen Enterprises and China Man Made Fiber, you can compare the effects of market volatilities on Yuan Jen and China Man 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 Yuan Jen with a short position of China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Jen and China Man.

Diversification Opportunities for Yuan Jen and China Man

0.25

Correlation Coefficient

Yuan Jen  China Man

Modest diversification

The 3 months correlation between Yuan and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Jen Enterprises and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and Yuan Jen 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 Yuan Jen Enterprises are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of Yuan Jen i.e., Yuan Jen and China Man go up and down completely randomly.

Pair Corralation between Yuan Jen and China Man

Assuming the 90 days trading horizon Yuan Jen Enterprises is expected to generate 2.57 times more return on investment than China Man. However, Yuan Jen is 2.57 times more volatile than China Man Made Fiber. It trades about -0.01 of its potential returns per unit of risk. China Man Made Fiber is currently generating about -0.06 per unit of risk. If you would invest  3,620  in Yuan Jen Enterprises on December 29, 2024 and sell it today you would lose (185.00) from holding Yuan Jen Enterprises or give up 5.11% of portfolio value over 90 days.

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

Yuan Jen Enterprises  vs.  China Man Made Fiber

Yuan Jen Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yuan Jen Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yuan Jen is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Man Made

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Man Made Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Man is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Yuan Jen and China Man

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

The idea behind Yuan Jen Enterprises and China Man Made Fiber 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.