Correlation Between Yili Chuanning and Zhejiang Construction

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

Diversification Opportunities for Yili Chuanning and Zhejiang Construction

0.22

Correlation Coefficient

Yili Chuanning  Zhejiang Construction

Modest diversification

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

Pair Corralation between Yili Chuanning and Zhejiang Construction

Assuming the 90 days trading horizon Yili Chuanning Biotechnology is expected to generate 1.04 times more return on investment than Zhejiang Construction. However, Yili Chuanning is 1.04 times more volatile than Zhejiang Construction Investment. It trades about 0.03 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about -0.06 per unit of risk. If you would invest  894.00  in Yili Chuanning Biotechnology on October 15, 2024 and sell it today you would earn a total of  226.00  from holding Yili Chuanning Biotechnology or generate 25.28% 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.  Zhejiang Construction Investme

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.

Zhejiang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Construction Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Yili Chuanning and Zhejiang Construction

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

The idea behind Yili Chuanning Biotechnology and Zhejiang Construction Investment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.