Correlation Between Yili Chuanning and Hengli Industrial

Can any of the company-specific risk be diversified away by investing in both Yili Chuanning and Hengli Industrial 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 Yili Chuanning and Hengli Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yili Chuanning Biotechnology and Hengli Industrial Development, you can compare the effects of market volatilities on Yili Chuanning and Hengli Industrial 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 Yili Chuanning with a short position of Hengli Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yili Chuanning and Hengli Industrial.

Diversification Opportunities for Yili Chuanning and Hengli Industrial

0.22

Correlation Coefficient

Yili Chuanning  Hengli Industrial

Modest diversification

The 3 months correlation between Yili and Hengli is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Yili Chuanning Biotechnology and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial and Yili Chuanning 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 Yili Chuanning Biotechnology are associated (or correlated) with Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of Yili Chuanning i.e., Yili Chuanning and Hengli Industrial go up and down completely randomly.

Pair Corralation between Yili Chuanning and Hengli Industrial

Assuming the 90 days trading horizon Yili Chuanning Biotechnology is expected to generate 0.9 times more return on investment than Hengli Industrial. However, Yili Chuanning Biotechnology is 1.12 times less risky than Hengli Industrial. It trades about 0.04 of its potential returns per unit of risk. Hengli Industrial Development is currently generating about -0.03 per unit of risk. If you would invest  852.00  in Yili Chuanning Biotechnology on October 10, 2024 and sell it today you would earn a total of  327.00  from holding Yili Chuanning Biotechnology or generate 38.38% return on investment over 90 days.

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

Yili Chuanning Biotechnology  vs.  Hengli Industrial Development

Yili Chuanning Biote

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hengli Industrial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yili Chuanning and Hengli Industrial

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

The idea behind Yili Chuanning Biotechnology and Hengli Industrial Development 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.