Correlation Between Huaneng Lancang and Yunnan Copper

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

By analyzing existing cross correlation between Huaneng Lancang River and Yunnan Copper Co, you can compare the effects of market volatilities on Huaneng Lancang and Yunnan Copper 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 Huaneng Lancang with a short position of Yunnan Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Lancang and Yunnan Copper.

Diversification Opportunities for Huaneng Lancang and Yunnan Copper

0.01

Correlation Coefficient

Huaneng Lancang  Yunnan Copper

Significant diversification

The 3 months correlation between Huaneng and Yunnan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Lancang River and Yunnan Copper Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Copper and Huaneng Lancang 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 Huaneng Lancang River are associated (or correlated) with Yunnan Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Copper has no effect on the direction of Huaneng Lancang i.e., Huaneng Lancang and Yunnan Copper go up and down completely randomly.

Pair Corralation between Huaneng Lancang and Yunnan Copper

Assuming the 90 days trading horizon Huaneng Lancang River is expected to under-perform the Yunnan Copper. But the stock apears to be less risky and, when comparing its historical volatility, Huaneng Lancang River is 1.29 times less risky than Yunnan Copper. The stock trades about -0.19 of its potential returns per unit of risk. The Yunnan Copper Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,273  in Yunnan Copper Co on December 4, 2024 and sell it today you would lose (11.00) from holding Yunnan Copper Co or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Huaneng Lancang River  vs.  Yunnan Copper Co

Huaneng Lancang River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huaneng Lancang River 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Yunnan Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yunnan Copper Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yunnan Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huaneng Lancang and Yunnan Copper

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

The idea behind Huaneng Lancang River and Yunnan Copper 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.