Correlation Between YLZ Information and Nanjing Medlander

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

By analyzing existing cross correlation between YLZ Information Tech and Nanjing Medlander Medical, you can compare the effects of market volatilities on YLZ Information and Nanjing Medlander 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 YLZ Information with a short position of Nanjing Medlander. Check out your portfolio center. Please also check ongoing floating volatility patterns of YLZ Information and Nanjing Medlander.

Diversification Opportunities for YLZ Information and Nanjing Medlander

0.92

Correlation Coefficient

YLZ Information  Nanjing Medlander

Almost no diversification

The 3 months correlation between YLZ and Nanjing is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding YLZ Information Tech and Nanjing Medlander Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Medlander Medical and YLZ Information 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 YLZ Information Tech are associated (or correlated) with Nanjing Medlander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Medlander Medical has no effect on the direction of YLZ Information i.e., YLZ Information and Nanjing Medlander go up and down completely randomly.

Pair Corralation between YLZ Information and Nanjing Medlander

Assuming the 90 days trading horizon YLZ Information Tech is expected to generate 1.26 times more return on investment than Nanjing Medlander. However, YLZ Information is 1.26 times more volatile than Nanjing Medlander Medical. It trades about 0.01 of its potential returns per unit of risk. Nanjing Medlander Medical is currently generating about -0.1 per unit of risk. If you would invest  347.00  in YLZ Information Tech on September 26, 2024 and sell it today you would lose (1.00) from holding YLZ Information Tech or give up 0.29% of portfolio value over 90 days.

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

YLZ Information Tech  vs.  Nanjing Medlander Medical

YLZ Information Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YLZ Information Tech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YLZ Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Nanjing Medlander Medical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Medlander Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Medlander sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YLZ Information and Nanjing Medlander

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

The idea behind YLZ Information Tech and Nanjing Medlander Medical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.