Correlation Between Zhonghong Pulin and JuneYao Dairy

Can any of the company-specific risk be diversified away by investing in both Zhonghong Pulin and JuneYao Dairy 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 Zhonghong Pulin and JuneYao Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhonghong Pulin Medical and JuneYao Dairy Co, you can compare the effects of market volatilities on Zhonghong Pulin and JuneYao Dairy 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 Zhonghong Pulin with a short position of JuneYao Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhonghong Pulin and JuneYao Dairy.

Diversification Opportunities for Zhonghong Pulin and JuneYao Dairy

0.31

Correlation Coefficient

Zhonghong Pulin  JuneYao Dairy

Weak diversification

The 3 months correlation between Zhonghong and JuneYao is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zhonghong Pulin Medical and JuneYao Dairy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JuneYao Dairy and Zhonghong Pulin 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 Zhonghong Pulin Medical are associated (or correlated) with JuneYao Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JuneYao Dairy has no effect on the direction of Zhonghong Pulin i.e., Zhonghong Pulin and JuneYao Dairy go up and down completely randomly.

Pair Corralation between Zhonghong Pulin and JuneYao Dairy

Assuming the 90 days trading horizon Zhonghong Pulin Medical is expected to under-perform the JuneYao Dairy. But the stock apears to be less risky and, when comparing its historical volatility, Zhonghong Pulin Medical is 1.37 times less risky than JuneYao Dairy. The stock trades about -0.05 of its potential returns per unit of risk. The JuneYao Dairy Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  646.00  in JuneYao Dairy Co on December 26, 2024 and sell it today you would earn a total of  18.00  from holding JuneYao Dairy Co or generate 2.79% return on investment over 90 days.

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

Zhonghong Pulin Medical  vs.  JuneYao Dairy Co

Zhonghong Pulin Medical

Risk-Adjusted Performance

Very Weak

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

JuneYao Dairy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JuneYao Dairy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhonghong Pulin and JuneYao Dairy

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

The idea behind Zhonghong Pulin Medical and JuneYao Dairy Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.