Correlation Between Yili Chuanning and Hainan Expressway

Can any of the company-specific risk be diversified away by investing in both Yili Chuanning and Hainan Expressway 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 Hainan Expressway 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 Hainan Expressway Co, you can compare the effects of market volatilities on Yili Chuanning and Hainan Expressway 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 Hainan Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yili Chuanning and Hainan Expressway.

Diversification Opportunities for Yili Chuanning and Hainan Expressway

0.43

Correlation Coefficient

Yili Chuanning  Hainan Expressway

Very weak diversification

The 3 months correlation between Yili and Hainan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Yili Chuanning Biotechnology and Hainan Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Expressway 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 Hainan Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Expressway has no effect on the direction of Yili Chuanning i.e., Yili Chuanning and Hainan Expressway go up and down completely randomly.

Pair Corralation between Yili Chuanning and Hainan Expressway

Assuming the 90 days trading horizon Yili Chuanning Biotechnology is expected to generate 0.62 times more return on investment than Hainan Expressway. However, Yili Chuanning Biotechnology is 1.61 times less risky than Hainan Expressway. It trades about 0.02 of its potential returns per unit of risk. Hainan Expressway Co is currently generating about -0.01 per unit of risk. If you would invest  1,242  in Yili Chuanning Biotechnology on December 24, 2024 and sell it today you would earn a total of  17.00  from holding Yili Chuanning Biotechnology or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Yili Chuanning Biotechnology  vs.  Hainan Expressway Co

Yili Chuanning Biote

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yili Chuanning Biotechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Hainan Expressway

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Yili Chuanning and Hainan Expressway

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

The idea behind Yili Chuanning Biotechnology and Hainan Expressway Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.