Correlation Between Gifore Agricultural and Yili Chuanning

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

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

Diversification Opportunities for Gifore Agricultural and Yili Chuanning

-0.13

Correlation Coefficient

Gifore Agricultural  Yili Chuanning

Good diversification

The 3 months correlation between Gifore and Yili is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gifore Agricultural Machinery 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 Gifore Agricultural 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 Gifore Agricultural Machinery 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 Gifore Agricultural i.e., Gifore Agricultural and Yili Chuanning go up and down completely randomly.

Pair Corralation between Gifore Agricultural and Yili Chuanning

Assuming the 90 days trading horizon Gifore Agricultural is expected to generate 4.61 times less return on investment than Yili Chuanning. But when comparing it to its historical volatility, Gifore Agricultural Machinery is 1.02 times less risky than Yili Chuanning. It trades about 0.01 of its potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  819.00  in Yili Chuanning Biotechnology on October 9, 2024 and sell it today you would earn a total of  360.00  from holding Yili Chuanning Biotechnology or generate 43.96% return on investment over 90 days.

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

Gifore Agricultural Machinery  vs.  Yili Chuanning Biotechnology

Gifore Agricultural

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gifore Agricultural Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gifore Agricultural 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 Gifore Agricultural and Yili Chuanning

The main advantage of trading using opposite Gifore Agricultural and Yili Chuanning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gifore Agricultural 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 Gifore Agricultural Machinery 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.