Correlation Between Holy Stone and Yuan High

Can any of the company-specific risk be diversified away by investing in both Holy Stone and Yuan High 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 Holy Stone and Yuan High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holy Stone Enterprise and Yuan High Tech Development, you can compare the effects of market volatilities on Holy Stone and Yuan High 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 Holy Stone with a short position of Yuan High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and Yuan High.

Diversification Opportunities for Holy Stone and Yuan High

-0.63

Correlation Coefficient

Holy Stone  Yuan High

Excellent diversification

The 3 months correlation between Holy and Yuan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Yuan High Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan High Tech and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with Yuan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan High Tech has no effect on the direction of Holy Stone i.e., Holy Stone and Yuan High go up and down completely randomly.

Pair Corralation between Holy Stone and Yuan High

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the Yuan High. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 5.47 times less risky than Yuan High. The stock trades about -0.1 of its potential returns per unit of risk. The Yuan High Tech Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,700  in Yuan High Tech Development on October 24, 2024 and sell it today you would earn a total of  1,100  from holding Yuan High Tech Development or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Holy Stone Enterprise  vs.  Yuan High Tech Development

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holy Stone is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yuan High Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan High Tech Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuan High may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Holy Stone and Yuan High

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

The idea behind Holy Stone Enterprise and Yuan High Tech Development 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.