Correlation Between Yuan High and Microelectronics

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

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

Diversification Opportunities for Yuan High and Microelectronics

-0.48

Correlation Coefficient

Yuan High  Microelectronics

Very good diversification

The 3 months correlation between Yuan and Microelectronics is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Yuan High Tech Development and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and Yuan High 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 Yuan High Tech Development are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Yuan High i.e., Yuan High and Microelectronics go up and down completely randomly.

Pair Corralation between Yuan High and Microelectronics

Assuming the 90 days trading horizon Yuan High Tech Development is expected to under-perform the Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Yuan High Tech Development is 1.11 times less risky than Microelectronics. The stock trades about -0.02 of its potential returns per unit of risk. The Microelectronics Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,065  in Microelectronics Technology on September 14, 2024 and sell it today you would lose (45.00) from holding Microelectronics Technology or give up 1.47% of portfolio value over 90 days.

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

Yuan High Tech Development  vs.  Microelectronics Technology

Yuan High Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Microelectronics Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microelectronics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Microelectronics 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 Yuan High and Microelectronics

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

The idea behind Yuan High Tech Development and Microelectronics Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.