Correlation Between Yingde Greatchem and Hunan Mendale

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Hunan Mendale 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 Yingde Greatchem and Hunan Mendale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Hunan Mendale Hometextile, you can compare the effects of market volatilities on Yingde Greatchem and Hunan Mendale 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 Yingde Greatchem with a short position of Hunan Mendale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Hunan Mendale.

Diversification Opportunities for Yingde Greatchem and Hunan Mendale

0.05

Correlation Coefficient

Yingde Greatchem  Hunan Mendale

Significant diversification

The 3 months correlation between Yingde and Hunan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Hunan Mendale Hometextile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Mendale Hometextile and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Hunan Mendale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Mendale Hometextile has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Hunan Mendale go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Hunan Mendale

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to under-perform the Hunan Mendale. But the stock apears to be less risky and, when comparing its historical volatility, Yingde Greatchem Chemicals is 2.13 times less risky than Hunan Mendale. The stock trades about -0.11 of its potential returns per unit of risk. The Hunan Mendale Hometextile is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  281.00  in Hunan Mendale Hometextile on October 11, 2024 and sell it today you would earn a total of  121.00  from holding Hunan Mendale Hometextile or generate 43.06% return on investment over 90 days.

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

Yingde Greatchem Chemicals  vs.  Hunan Mendale Hometextile

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yingde Greatchem Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yingde Greatchem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hunan Mendale Hometextile

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yingde Greatchem and Hunan Mendale

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

The idea behind Yingde Greatchem Chemicals and Hunan Mendale Hometextile 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.