Correlation Between Zhejiang Juhua and Yunnan Chuangxin

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

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

Diversification Opportunities for Zhejiang Juhua and Yunnan Chuangxin

-0.31

Correlation Coefficient

Zhejiang Juhua  Yunnan Chuangxin

Very good diversification

The 3 months correlation between Zhejiang and Yunnan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Yunnan Chuangxin New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chuangxin New and Zhejiang Juhua 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 Zhejiang Juhua Co are associated (or correlated) with Yunnan Chuangxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chuangxin New has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Yunnan Chuangxin go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Yunnan Chuangxin

Assuming the 90 days trading horizon Zhejiang Juhua Co is expected to generate 1.05 times more return on investment than Yunnan Chuangxin. However, Zhejiang Juhua is 1.05 times more volatile than Yunnan Chuangxin New. It trades about 0.03 of its potential returns per unit of risk. Yunnan Chuangxin New is currently generating about -0.03 per unit of risk. If you would invest  2,387  in Zhejiang Juhua Co on December 30, 2024 and sell it today you would earn a total of  53.00  from holding Zhejiang Juhua Co or generate 2.22% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Yunnan Chuangxin New

Zhejiang Juhua

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Juhua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yunnan Chuangxin New

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhejiang Juhua and Yunnan Chuangxin

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

The idea behind Zhejiang Juhua Co and Yunnan Chuangxin New 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.