Correlation Between Kunwu Jiuding and Sichuan Yahua

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

By analyzing existing cross correlation between Kunwu Jiuding Investment and Sichuan Yahua Industrial, you can compare the effects of market volatilities on Kunwu Jiuding and Sichuan Yahua 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 Kunwu Jiuding with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kunwu Jiuding and Sichuan Yahua.

Diversification Opportunities for Kunwu Jiuding and Sichuan Yahua

0.27

Correlation Coefficient

Kunwu Jiuding  Sichuan Yahua

Modest diversification

The 3 months correlation between Kunwu and Sichuan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kunwu Jiuding Investment and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and Kunwu Jiuding 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 Kunwu Jiuding Investment are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of Kunwu Jiuding i.e., Kunwu Jiuding and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Kunwu Jiuding and Sichuan Yahua

Assuming the 90 days trading horizon Kunwu Jiuding Investment is expected to under-perform the Sichuan Yahua. In addition to that, Kunwu Jiuding is 1.15 times more volatile than Sichuan Yahua Industrial. It trades about -0.13 of its total potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.01 per unit of volatility. If you would invest  1,224  in Sichuan Yahua Industrial on November 30, 2024 and sell it today you would lose (6.00) from holding Sichuan Yahua Industrial or give up 0.49% of portfolio value over 90 days.

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

Kunwu Jiuding Investment  vs.  Sichuan Yahua Industrial

Kunwu Jiuding Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kunwu Jiuding Investment 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sichuan Yahua Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kunwu Jiuding and Sichuan Yahua

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

The idea behind Kunwu Jiuding Investment and Sichuan Yahua Industrial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.