Correlation Between Yili Chuanning and Hangzhou Prevail

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

Diversification Opportunities for Yili Chuanning and Hangzhou Prevail

0.94

Correlation Coefficient

Yili Chuanning  Hangzhou Prevail

Almost no diversification

The 3 months correlation between Yili and Hangzhou is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Yili Chuanning Biotechnology and Hangzhou Prevail Optoelectroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Prevail Opt 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 Hangzhou Prevail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Prevail Opt has no effect on the direction of Yili Chuanning i.e., Yili Chuanning and Hangzhou Prevail go up and down completely randomly.

Pair Corralation between Yili Chuanning and Hangzhou Prevail

Assuming the 90 days trading horizon Yili Chuanning is expected to generate 1.36 times less return on investment than Hangzhou Prevail. But when comparing it to its historical volatility, Yili Chuanning Biotechnology is 1.03 times less risky than Hangzhou Prevail. It trades about 0.09 of its potential returns per unit of risk. Hangzhou Prevail Optoelectronic is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,597  in Hangzhou Prevail Optoelectronic on September 3, 2024 and sell it today you would earn a total of  465.00  from holding Hangzhou Prevail Optoelectronic or generate 29.12% return on investment over 90 days.

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

Yili Chuanning Biotechnology  vs.  Hangzhou Prevail Optoelectroni

Yili Chuanning Biote

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yili Chuanning Biotechnology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yili Chuanning sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou Prevail Opt

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Yili Chuanning and Hangzhou Prevail

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

The idea behind Yili Chuanning Biotechnology and Hangzhou Prevail Optoelectronic 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.