Correlation Between Yulon Nissan and YoungQin International

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

By analyzing existing cross correlation between Yulon Nissan Motor and YoungQin International Co, you can compare the effects of market volatilities on Yulon Nissan and YoungQin International 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 Yulon Nissan with a short position of YoungQin International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon Nissan and YoungQin International.

Diversification Opportunities for Yulon Nissan and YoungQin International

0.56

Correlation Coefficient

Yulon Nissan  YoungQin International

Very weak diversification

The 3 months correlation between Yulon and YoungQin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Nissan Motor and YoungQin International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YoungQin International and Yulon Nissan 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 Yulon Nissan Motor are associated (or correlated) with YoungQin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YoungQin International has no effect on the direction of Yulon Nissan i.e., Yulon Nissan and YoungQin International go up and down completely randomly.

Pair Corralation between Yulon Nissan and YoungQin International

Assuming the 90 days trading horizon Yulon Nissan Motor is expected to under-perform the YoungQin International. But the stock apears to be less risky and, when comparing its historical volatility, Yulon Nissan Motor is 1.08 times less risky than YoungQin International. The stock trades about -0.04 of its potential returns per unit of risk. The YoungQin International Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,250  in YoungQin International Co on December 29, 2024 and sell it today you would earn a total of  2,350  from holding YoungQin International Co or generate 22.93% return on investment over 90 days.

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

Yulon Nissan Motor  vs.  YoungQin International Co

Yulon Nissan Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yulon Nissan Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

YoungQin International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in YoungQin International Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, YoungQin International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yulon Nissan and YoungQin International

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

The idea behind Yulon Nissan Motor and YoungQin International Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.