Correlation Between Yingde Greatchem and Suofeiya Home

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Suofeiya Home 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 Suofeiya Home 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 Suofeiya Home Collection, you can compare the effects of market volatilities on Yingde Greatchem and Suofeiya Home 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 Suofeiya Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Suofeiya Home.

Diversification Opportunities for Yingde Greatchem and Suofeiya Home

0.85

Correlation Coefficient

Yingde Greatchem  Suofeiya Home

Very poor diversification

The 3 months correlation between Yingde and Suofeiya is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Suofeiya Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suofeiya Home Collection 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 Suofeiya Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suofeiya Home Collection has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Suofeiya Home go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Suofeiya Home

Assuming the 90 days trading horizon Yingde Greatchem is expected to generate 1.07 times less return on investment than Suofeiya Home. But when comparing it to its historical volatility, Yingde Greatchem Chemicals is 1.21 times less risky than Suofeiya Home. It trades about 0.12 of its potential returns per unit of risk. Suofeiya Home Collection is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Suofeiya Home Collection on September 24, 2024 and sell it today you would earn a total of  293.00  from holding Suofeiya Home Collection or generate 20.93% return on investment over 90 days.

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

Yingde Greatchem Chemicals  vs.  Suofeiya Home Collection

Yingde Greatchem Che

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yingde Greatchem sustained solid returns over the last few months and may actually be approaching a breakup point.

Suofeiya Home Collection

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suofeiya Home Collection are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suofeiya Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yingde Greatchem and Suofeiya Home

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

The idea behind Yingde Greatchem Chemicals and Suofeiya Home Collection 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 Global Correlations module to find global opportunities by holding instruments from different markets.