Correlation Between Advanced Lithium and Yonyu Plastics

Can any of the company-specific risk be diversified away by investing in both Advanced Lithium and Yonyu Plastics 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 Advanced Lithium and Yonyu Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Lithium Electrochemistry and Yonyu Plastics Co, you can compare the effects of market volatilities on Advanced Lithium and Yonyu Plastics 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 Advanced Lithium with a short position of Yonyu Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Lithium and Yonyu Plastics.

Diversification Opportunities for Advanced Lithium and Yonyu Plastics

-0.02

Correlation Coefficient

Advanced Lithium  Yonyu Plastics

Good diversification

The 3 months correlation between Advanced and Yonyu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Lithium Electrochemis and Yonyu Plastics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yonyu Plastics and Advanced Lithium 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 Advanced Lithium Electrochemistry are associated (or correlated) with Yonyu Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yonyu Plastics has no effect on the direction of Advanced Lithium i.e., Advanced Lithium and Yonyu Plastics go up and down completely randomly.

Pair Corralation between Advanced Lithium and Yonyu Plastics

Assuming the 90 days trading horizon Advanced Lithium Electrochemistry is expected to generate 106.15 times more return on investment than Yonyu Plastics. However, Advanced Lithium is 106.15 times more volatile than Yonyu Plastics Co. It trades about 0.06 of its potential returns per unit of risk. Yonyu Plastics Co is currently generating about -0.1 per unit of risk. If you would invest  8,471  in Advanced Lithium Electrochemistry on October 10, 2024 and sell it today you would lose (4,231) from holding Advanced Lithium Electrochemistry or give up 49.95% of portfolio value over 90 days.

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

Advanced Lithium Electrochemis  vs.  Yonyu Plastics Co

Advanced Lithium Ele

Risk-Adjusted Performance

9 of 100

OK

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

Yonyu Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Advanced Lithium and Yonyu Plastics

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

The idea behind Advanced Lithium Electrochemistry and Yonyu Plastics 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.