Correlation Between Yunnan Yuntianhua and Zhejiang Juhua

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

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

Diversification Opportunities for Yunnan Yuntianhua and Zhejiang Juhua

-0.39

Correlation Coefficient

Yunnan Yuntianhua  Zhejiang Juhua

Very good diversification

The 3 months correlation between Yunnan and Zhejiang is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Yuntianhua Co and Zhejiang Juhua Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Juhua and Yunnan Yuntianhua 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 Yunnan Yuntianhua Co are associated (or correlated) with Zhejiang Juhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Juhua has no effect on the direction of Yunnan Yuntianhua i.e., Yunnan Yuntianhua and Zhejiang Juhua go up and down completely randomly.

Pair Corralation between Yunnan Yuntianhua and Zhejiang Juhua

Assuming the 90 days trading horizon Yunnan Yuntianhua is expected to generate 6.43 times less return on investment than Zhejiang Juhua. But when comparing it to its historical volatility, Yunnan Yuntianhua Co is 1.39 times less risky than Zhejiang Juhua. It trades about 0.01 of its potential returns per unit of risk. Zhejiang Juhua Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,580  in Zhejiang Juhua Co on October 13, 2024 and sell it today you would earn a total of  925.00  from holding Zhejiang Juhua Co or generate 58.54% return on investment over 90 days.

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

Yunnan Yuntianhua Co  vs.  Zhejiang Juhua Co

Yunnan Yuntianhua

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhejiang Juhua

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yunnan Yuntianhua and Zhejiang Juhua

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

The idea behind Yunnan Yuntianhua Co and Zhejiang Juhua 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .