Correlation Between Zhejiang Yayi and Sunny Loan

Can any of the company-specific risk be diversified away by investing in both Zhejiang Yayi and Sunny Loan 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 Sunny Loan 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 Sunny Loan Top, you can compare the effects of market volatilities on Zhejiang Yayi and Sunny Loan 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 Sunny Loan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yayi and Sunny Loan.

Diversification Opportunities for Zhejiang Yayi and Sunny Loan

0.82

Correlation Coefficient

Zhejiang Yayi  Sunny Loan

Very poor diversification

The 3 months correlation between Zhejiang and Sunny is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yayi Metal and Sunny Loan Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Loan Top 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 Sunny Loan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Loan Top has no effect on the direction of Zhejiang Yayi i.e., Zhejiang Yayi and Sunny Loan go up and down completely randomly.

Pair Corralation between Zhejiang Yayi and Sunny Loan

Assuming the 90 days trading horizon Zhejiang Yayi is expected to generate 2.14 times less return on investment than Sunny Loan. In addition to that, Zhejiang Yayi is 1.12 times more volatile than Sunny Loan Top. It trades about 0.02 of its total potential returns per unit of risk. Sunny Loan Top is currently generating about 0.05 per unit of volatility. If you would invest  618.00  in Sunny Loan Top on September 19, 2024 and sell it today you would earn a total of  471.00  from holding Sunny Loan Top or generate 76.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Zhejiang Yayi Metal  vs.  Sunny Loan Top

Zhejiang Yayi Metal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yayi Metal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yayi sustained solid returns over the last few months and may actually be approaching a breakup point.

Sunny Loan Top

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Zhejiang Yayi and Sunny Loan

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

The idea behind Zhejiang Yayi Metal and Sunny Loan Top 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.