Correlation Between Xinke Material and ShenZhen YUTO

Can any of the company-specific risk be diversified away by investing in both Xinke Material and ShenZhen YUTO 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 Xinke Material and ShenZhen YUTO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinke Material and ShenZhen YUTO Packaging, you can compare the effects of market volatilities on Xinke Material and ShenZhen YUTO 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 Xinke Material with a short position of ShenZhen YUTO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and ShenZhen YUTO.

Diversification Opportunities for Xinke Material and ShenZhen YUTO

-0.31

Correlation Coefficient

Xinke Material  ShenZhen YUTO

Very good diversification

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

Pair Corralation between Xinke Material and ShenZhen YUTO

Assuming the 90 days trading horizon Xinke Material is expected to under-perform the ShenZhen YUTO. In addition to that, Xinke Material is 3.39 times more volatile than ShenZhen YUTO Packaging. It trades about -0.03 of its total potential returns per unit of risk. ShenZhen YUTO Packaging is currently generating about -0.04 per unit of volatility. If you would invest  2,693  in ShenZhen YUTO Packaging on December 26, 2024 and sell it today you would lose (94.00) from holding ShenZhen YUTO Packaging or give up 3.49% of portfolio value over 90 days.

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

Xinke Material  vs.  ShenZhen YUTO Packaging

Xinke Material

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinke Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ShenZhen YUTO Packaging

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xinke Material and ShenZhen YUTO

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

The idea behind Xinke Material and ShenZhen YUTO Packaging 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.