Correlation Between Yili Chuanning and Dongxing Sec

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

Diversification Opportunities for Yili Chuanning and Dongxing Sec

0.74

Correlation Coefficient

Yili Chuanning  Dongxing Sec

Poor diversification

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

Pair Corralation between Yili Chuanning and Dongxing Sec

Assuming the 90 days trading horizon Yili Chuanning Biotechnology is expected to generate 0.91 times more return on investment than Dongxing Sec. However, Yili Chuanning Biotechnology is 1.1 times less risky than Dongxing Sec. It trades about 0.04 of its potential returns per unit of risk. Dongxing Sec Co is currently generating about 0.03 per unit of risk. If you would invest  1,226  in Yili Chuanning Biotechnology on December 25, 2024 and sell it today you would earn a total of  41.00  from holding Yili Chuanning Biotechnology or generate 3.34% 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.  Dongxing Sec 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 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.

Dongxing Sec

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongxing Sec 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 Dongxing Sec

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

The idea behind Yili Chuanning Biotechnology and Dongxing Sec 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.