Correlation Between Nanjing Putian and Yili Chuanning

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

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Nanjing Putian and Yili Chuanning 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 Nanjing Putian with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Yili Chuanning.

Diversification Opportunities for Nanjing Putian and Yili Chuanning

0.31

Correlation Coefficient

Nanjing Putian  Yili Chuanning

Weak diversification

The 3 months correlation between Nanjing and Yili is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Yili Chuanning go up and down completely randomly.

Pair Corralation between Nanjing Putian and Yili Chuanning

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to under-perform the Yili Chuanning. In addition to that, Nanjing Putian is 1.97 times more volatile than Yili Chuanning Biotechnology. It trades about -0.36 of its total potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about -0.31 per unit of volatility. If you would invest  1,326  in Yili Chuanning Biotechnology on October 9, 2024 and sell it today you would lose (137.00) from holding Yili Chuanning Biotechnology or give up 10.33% of portfolio value over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Yili Chuanning Biotechnology

Nanjing Putian Telec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Yili Chuanning Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yili Chuanning Biotechnology 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 Nanjing Putian and Yili Chuanning

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

The idea behind Nanjing Putian Telecommunications and Yili Chuanning Biotechnology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.