Correlation Between YiDong Electronics and Xinjiang Daqo

Can any of the company-specific risk be diversified away by investing in both YiDong Electronics and Xinjiang Daqo 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 Xinjiang Daqo 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 Xinjiang Daqo New, you can compare the effects of market volatilities on YiDong Electronics and Xinjiang Daqo 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 Xinjiang Daqo. Check out your portfolio center. Please also check ongoing floating volatility patterns of YiDong Electronics and Xinjiang Daqo.

Diversification Opportunities for YiDong Electronics and Xinjiang Daqo

0.54

Correlation Coefficient

YiDong Electronics  Xinjiang Daqo

Very weak diversification

The 3 months correlation between YiDong and Xinjiang is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding YiDong Electronics Technology and Xinjiang Daqo New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Daqo New 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 Xinjiang Daqo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Daqo New has no effect on the direction of YiDong Electronics i.e., YiDong Electronics and Xinjiang Daqo go up and down completely randomly.

Pair Corralation between YiDong Electronics and Xinjiang Daqo

Assuming the 90 days trading horizon YiDong Electronics is expected to generate 1.44 times less return on investment than Xinjiang Daqo. But when comparing it to its historical volatility, YiDong Electronics Technology is 1.24 times less risky than Xinjiang Daqo. It trades about 0.06 of its potential returns per unit of risk. Xinjiang Daqo New is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,028  in Xinjiang Daqo New on September 27, 2024 and sell it today you would earn a total of  607.00  from holding Xinjiang Daqo New or generate 29.93% return on investment over 90 days.

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

YiDong Electronics Technology  vs.  Xinjiang Daqo New

YiDong Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YiDong Electronics Technology are ranked lower than 9 (%) 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.

Xinjiang Daqo New

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Daqo New are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Daqo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YiDong Electronics and Xinjiang Daqo

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

The idea behind YiDong Electronics Technology and Xinjiang Daqo New 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.