Correlation Between Wanhua Chemical and Yunnan Bowin

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

By analyzing existing cross correlation between Wanhua Chemical Group and Yunnan Bowin Technology, you can compare the effects of market volatilities on Wanhua Chemical and Yunnan Bowin 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 Wanhua Chemical with a short position of Yunnan Bowin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wanhua Chemical and Yunnan Bowin.

Diversification Opportunities for Wanhua Chemical and Yunnan Bowin

0.0

Correlation Coefficient

Wanhua Chemical  Yunnan Bowin

Pay attention - limited upside

The 3 months correlation between Wanhua and Yunnan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wanhua Chemical Group and Yunnan Bowin Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Bowin Technology and Wanhua Chemical 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 Wanhua Chemical Group are associated (or correlated) with Yunnan Bowin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Bowin Technology has no effect on the direction of Wanhua Chemical i.e., Wanhua Chemical and Yunnan Bowin go up and down completely randomly.

Pair Corralation between Wanhua Chemical and Yunnan Bowin

If you would invest  7,017  in Wanhua Chemical Group on September 4, 2024 and sell it today you would earn a total of  522.00  from holding Wanhua Chemical Group or generate 7.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Wanhua Chemical Group  vs.  Yunnan Bowin Technology

Wanhua Chemical Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wanhua Chemical Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wanhua Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yunnan Bowin Technology

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Wanhua Chemical and Yunnan Bowin

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

The idea behind Wanhua Chemical Group and Yunnan Bowin Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.