Correlation Between Tainet Communication and Yuan High

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

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

Diversification Opportunities for Tainet Communication and Yuan High

0.13

Correlation Coefficient

Tainet Communication  Yuan High

Average diversification

The 3 months correlation between Tainet and Yuan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tainet Communication System 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 Tainet Communication 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 Tainet Communication System 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 Tainet Communication i.e., Tainet Communication and Yuan High go up and down completely randomly.

Pair Corralation between Tainet Communication and Yuan High

Assuming the 90 days trading horizon Tainet Communication System is expected to under-perform the Yuan High. But the stock apears to be less risky and, when comparing its historical volatility, Tainet Communication System is 3.8 times less risky than Yuan High. The stock trades about -0.18 of its potential returns per unit of risk. The Yuan High Tech Development is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  15,450  in Yuan High Tech Development on September 27, 2024 and sell it today you would earn a total of  5,450  from holding Yuan High Tech Development or generate 35.28% return on investment over 90 days.

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

Tainet Communication System  vs.  Yuan High Tech Development

Tainet Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tainet Communication System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Yuan High Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan High Tech Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuan High showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tainet Communication and Yuan High

The main advantage of trading using opposite Tainet Communication and Yuan High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainet Communication 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 Tainet Communication System 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.