Correlation Between Zhejiang Yayi and Fushun Special

Can any of the company-specific risk be diversified away by investing in both Zhejiang Yayi and Fushun Special 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 Zhejiang Yayi and Fushun Special into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Yayi Metal and Fushun Special Steel, you can compare the effects of market volatilities on Zhejiang Yayi and Fushun Special 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 Zhejiang Yayi with a short position of Fushun Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yayi and Fushun Special.

Diversification Opportunities for Zhejiang Yayi and Fushun Special

0.5

Correlation Coefficient

Zhejiang Yayi  Fushun Special

Very weak diversification

The 3 months correlation between Zhejiang and Fushun is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yayi Metal and Fushun Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fushun Special Steel and Zhejiang Yayi 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 Zhejiang Yayi Metal are associated (or correlated) with Fushun Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fushun Special Steel has no effect on the direction of Zhejiang Yayi i.e., Zhejiang Yayi and Fushun Special go up and down completely randomly.

Pair Corralation between Zhejiang Yayi and Fushun Special

Assuming the 90 days trading horizon Zhejiang Yayi Metal is expected to under-perform the Fushun Special. In addition to that, Zhejiang Yayi is 1.87 times more volatile than Fushun Special Steel. It trades about -0.19 of its total potential returns per unit of risk. Fushun Special Steel is currently generating about -0.34 per unit of volatility. If you would invest  628.00  in Fushun Special Steel on October 20, 2024 and sell it today you would lose (68.00) from holding Fushun Special Steel or give up 10.83% of portfolio value over 90 days.

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

Zhejiang Yayi Metal  vs.  Fushun Special Steel

Zhejiang Yayi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fushun Special Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fushun Special Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhejiang Yayi and Fushun Special

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

The idea behind Zhejiang Yayi Metal and Fushun Special Steel 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.