Correlation Between Company K and YeSUN Tech

Can any of the company-specific risk be diversified away by investing in both Company K and YeSUN Tech 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 Company K and YeSUN Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Company K Partners and YeSUN Tech CoLtd, you can compare the effects of market volatilities on Company K and YeSUN Tech 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 Company K with a short position of YeSUN Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Company K and YeSUN Tech.

Diversification Opportunities for Company K and YeSUN Tech

0.05

Correlation Coefficient

Company K  YeSUN Tech

Significant diversification

The 3 months correlation between Company and YeSUN is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Company K Partners and YeSUN Tech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YeSUN Tech CoLtd and Company K 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 Company K Partners are associated (or correlated) with YeSUN Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YeSUN Tech CoLtd has no effect on the direction of Company K i.e., Company K and YeSUN Tech go up and down completely randomly.

Pair Corralation between Company K and YeSUN Tech

Assuming the 90 days trading horizon Company K Partners is expected to generate 0.77 times more return on investment than YeSUN Tech. However, Company K Partners is 1.29 times less risky than YeSUN Tech. It trades about 0.04 of its potential returns per unit of risk. YeSUN Tech CoLtd is currently generating about -0.02 per unit of risk. If you would invest  472,000  in Company K Partners on December 10, 2024 and sell it today you would earn a total of  42,000  from holding Company K Partners or generate 8.9% return on investment over 90 days.

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

Company K Partners  vs.  YeSUN Tech CoLtd

Company K Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Company K Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Company K may actually be approaching a critical reversion point that can send shares even higher in April 2025.

YeSUN Tech CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YeSUN Tech CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YeSUN Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Company K and YeSUN Tech

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

The idea behind Company K Partners and YeSUN Tech CoLtd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.