Correlation Between State Grid and Yantai Jereh

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

By analyzing existing cross correlation between State Grid InformationCommunication and Yantai Jereh Oilfield, you can compare the effects of market volatilities on State Grid and Yantai Jereh 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 State Grid with a short position of Yantai Jereh. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Yantai Jereh.

Diversification Opportunities for State Grid and Yantai Jereh

0.69

Correlation Coefficient

State Grid  Yantai Jereh

Poor diversification

The 3 months correlation between State and Yantai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Yantai Jereh Oilfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai Jereh Oilfield and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Yantai Jereh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai Jereh Oilfield has no effect on the direction of State Grid i.e., State Grid and Yantai Jereh go up and down completely randomly.

Pair Corralation between State Grid and Yantai Jereh

Assuming the 90 days trading horizon State Grid is expected to generate 1.55 times less return on investment than Yantai Jereh. In addition to that, State Grid is 1.15 times more volatile than Yantai Jereh Oilfield. It trades about 0.02 of its total potential returns per unit of risk. Yantai Jereh Oilfield is currently generating about 0.03 per unit of volatility. If you would invest  3,110  in Yantai Jereh Oilfield on October 10, 2024 and sell it today you would earn a total of  633.00  from holding Yantai Jereh Oilfield or generate 20.35% return on investment over 90 days.

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

State Grid InformationCommunic  vs.  Yantai Jereh Oilfield

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Yantai Jereh Oilfield

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai Jereh Oilfield are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai Jereh may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with State Grid and Yantai Jereh

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

The idea behind State Grid InformationCommunication and Yantai Jereh Oilfield 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.