Correlation Between Changshu Ruite and Yantai North

Can any of the company-specific risk be diversified away by investing in both Changshu Ruite and Yantai North 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 Changshu Ruite and Yantai North into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changshu Ruite Electric and Yantai North Andre, you can compare the effects of market volatilities on Changshu Ruite and Yantai North 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 Changshu Ruite with a short position of Yantai North. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changshu Ruite and Yantai North.

Diversification Opportunities for Changshu Ruite and Yantai North

0.77

Correlation Coefficient

Changshu Ruite  Yantai North

Poor diversification

The 3 months correlation between Changshu and Yantai is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Changshu Ruite Electric and Yantai North Andre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai North Andre and Changshu Ruite 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 Changshu Ruite Electric are associated (or correlated) with Yantai North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai North Andre has no effect on the direction of Changshu Ruite i.e., Changshu Ruite and Yantai North go up and down completely randomly.

Pair Corralation between Changshu Ruite and Yantai North

Assuming the 90 days trading horizon Changshu Ruite is expected to generate 4.59 times less return on investment than Yantai North. In addition to that, Changshu Ruite is 1.11 times more volatile than Yantai North Andre. It trades about 0.05 of its total potential returns per unit of risk. Yantai North Andre is currently generating about 0.28 per unit of volatility. If you would invest  2,812  in Yantai North Andre on December 28, 2024 and sell it today you would earn a total of  836.00  from holding Yantai North Andre or generate 29.73% return on investment over 90 days.

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

Changshu Ruite Electric  vs.  Yantai North Andre

Changshu Ruite Electric

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changshu Ruite Electric are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changshu Ruite may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Yantai North Andre

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai North sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changshu Ruite and Yantai North

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

The idea behind Changshu Ruite Electric and Yantai North Andre 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.