Correlation Between YiDong Electronics and Xian International

Can any of the company-specific risk be diversified away by investing in both YiDong Electronics and Xian International 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 YiDong Electronics and Xian International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YiDong Electronics Technology and Xian International Medical, you can compare the effects of market volatilities on YiDong Electronics and Xian International 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 YiDong Electronics with a short position of Xian International. Check out your portfolio center. Please also check ongoing floating volatility patterns of YiDong Electronics and Xian International.

Diversification Opportunities for YiDong Electronics and Xian International

0.16

Correlation Coefficient

YiDong Electronics  Xian International

Average diversification

The 3 months correlation between YiDong and Xian is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding YiDong Electronics Technology and Xian International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xian International and YiDong Electronics 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 YiDong Electronics Technology are associated (or correlated) with Xian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xian International has no effect on the direction of YiDong Electronics i.e., YiDong Electronics and Xian International go up and down completely randomly.

Pair Corralation between YiDong Electronics and Xian International

Assuming the 90 days trading horizon YiDong Electronics Technology is expected to generate 1.95 times more return on investment than Xian International. However, YiDong Electronics is 1.95 times more volatile than Xian International Medical. It trades about 0.18 of its potential returns per unit of risk. Xian International Medical is currently generating about -0.42 per unit of risk. If you would invest  2,092  in YiDong Electronics Technology on October 11, 2024 and sell it today you would earn a total of  297.00  from holding YiDong Electronics Technology or generate 14.2% return on investment over 90 days.

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

YiDong Electronics Technology  vs.  Xian International Medical

YiDong Electronics

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YiDong Electronics Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YiDong Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Xian International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with YiDong Electronics and Xian International

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

The idea behind YiDong Electronics Technology and Xian International Medical 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.