Correlation Between Dongfeng Automobile and Yili Chuanning

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

By analyzing existing cross correlation between Dongfeng Automobile Co and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Dongfeng Automobile and Yili Chuanning 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 Dongfeng Automobile with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Yili Chuanning.

Diversification Opportunities for Dongfeng Automobile and Yili Chuanning

0.1

Correlation Coefficient

Dongfeng Automobile  Yili Chuanning

Average diversification

The 3 months correlation between Dongfeng and Yili is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Dongfeng Automobile 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 Dongfeng Automobile Co are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Yili Chuanning go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and Yili Chuanning

Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to under-perform the Yili Chuanning. In addition to that, Dongfeng Automobile is 1.68 times more volatile than Yili Chuanning Biotechnology. It trades about -0.2 of its total potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about -0.03 per unit of volatility. If you would invest  1,226  in Yili Chuanning Biotechnology on October 27, 2024 and sell it today you would lose (18.00) from holding Yili Chuanning Biotechnology or give up 1.47% of portfolio value over 90 days.

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

Dongfeng Automobile Co  vs.  Yili Chuanning Biotechnology

Dongfeng Automobile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Automobile Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongfeng Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yili Chuanning Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yili Chuanning Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dongfeng Automobile and Yili Chuanning

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

The idea behind Dongfeng Automobile Co and Yili Chuanning Biotechnology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.