Correlation Between Yili Chuanning and Guangzhou Haozhi

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

Diversification Opportunities for Yili Chuanning and Guangzhou Haozhi

0.74

Correlation Coefficient

Yili Chuanning  Guangzhou Haozhi

Poor diversification

The 3 months correlation between Yili and Guangzhou is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Yili Chuanning Biotechnology and Guangzhou Haozhi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haozhi Ind 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 Guangzhou Haozhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haozhi Ind has no effect on the direction of Yili Chuanning i.e., Yili Chuanning and Guangzhou Haozhi go up and down completely randomly.

Pair Corralation between Yili Chuanning and Guangzhou Haozhi

Assuming the 90 days trading horizon Yili Chuanning is expected to generate 6.42 times less return on investment than Guangzhou Haozhi. But when comparing it to its historical volatility, Yili Chuanning Biotechnology is 1.9 times less risky than Guangzhou Haozhi. It trades about 0.04 of its potential returns per unit of risk. Guangzhou Haozhi Industrial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,073  in Guangzhou Haozhi Industrial on December 25, 2024 and sell it today you would earn a total of  572.00  from holding Guangzhou Haozhi Industrial or generate 27.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Yili Chuanning Biotechnology  vs.  Guangzhou Haozhi Industrial

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 2 (%) 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.

Guangzhou Haozhi Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yili Chuanning and Guangzhou Haozhi

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

The idea behind Yili Chuanning Biotechnology and Guangzhou Haozhi Industrial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.