Correlation Between Yili Chuanning and Sihui Fuji

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

Diversification Opportunities for Yili Chuanning and Sihui Fuji

0.62

Correlation Coefficient

Yili Chuanning  Sihui Fuji

Poor diversification

The 3 months correlation between Yili and Sihui is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Yili Chuanning Biotechnology and Sihui Fuji Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sihui Fuji Electronics 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 Sihui Fuji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sihui Fuji Electronics has no effect on the direction of Yili Chuanning i.e., Yili Chuanning and Sihui Fuji go up and down completely randomly.

Pair Corralation between Yili Chuanning and Sihui Fuji

Assuming the 90 days trading horizon Yili Chuanning Biotechnology is expected to under-perform the Sihui Fuji. But the stock apears to be less risky and, when comparing its historical volatility, Yili Chuanning Biotechnology is 1.42 times less risky than Sihui Fuji. The stock trades about -0.19 of its potential returns per unit of risk. The Sihui Fuji Electronics is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,620  in Sihui Fuji Electronics on September 28, 2024 and sell it today you would earn a total of  314.00  from holding Sihui Fuji Electronics or generate 11.98% return on investment over 90 days.

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

Yili Chuanning Biotechnology  vs.  Sihui Fuji Electronics

Yili Chuanning Biote

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Yili Chuanning Biotechnology 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.

Sihui Fuji Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sihui Fuji Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sihui Fuji sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yili Chuanning and Sihui Fuji

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

The idea behind Yili Chuanning Biotechnology and Sihui Fuji Electronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.