Correlation Between Xinke Material and Yunnan Jianzhijia

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

By analyzing existing cross correlation between Xinke Material and Yunnan Jianzhijia Health Chain, you can compare the effects of market volatilities on Xinke Material and Yunnan Jianzhijia 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 Yunnan Jianzhijia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and Yunnan Jianzhijia.

Diversification Opportunities for Xinke Material and Yunnan Jianzhijia

0.13

Correlation Coefficient

Xinke Material  Yunnan Jianzhijia

Average diversification

The 3 months correlation between Xinke and Yunnan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Yunnan Jianzhijia Health Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Jianzhijia 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 Yunnan Jianzhijia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Jianzhijia has no effect on the direction of Xinke Material i.e., Xinke Material and Yunnan Jianzhijia go up and down completely randomly.

Pair Corralation between Xinke Material and Yunnan Jianzhijia

Assuming the 90 days trading horizon Xinke Material is expected to generate 1.01 times more return on investment than Yunnan Jianzhijia. However, Xinke Material is 1.01 times more volatile than Yunnan Jianzhijia Health Chain. It trades about 0.04 of its potential returns per unit of risk. Yunnan Jianzhijia Health Chain is currently generating about -0.05 per unit of risk. If you would invest  270.00  in Xinke Material on October 11, 2024 and sell it today you would earn a total of  130.00  from holding Xinke Material or generate 48.15% return on investment over 90 days.

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

Xinke Material  vs.  Yunnan Jianzhijia Health Chain

Xinke Material

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinke Material sustained solid returns over the last few months and may actually be approaching a breakup point.

Yunnan Jianzhijia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yunnan Jianzhijia Health Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yunnan Jianzhijia 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 Yunnan Jianzhijia

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

The idea behind Xinke Material and Yunnan Jianzhijia Health Chain 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.