Correlation Between Shandong Gold and Yunnan Yuntianhua

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

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

Diversification Opportunities for Shandong Gold and Yunnan Yuntianhua

0.27

Correlation Coefficient

Shandong Gold  Yunnan Yuntianhua

Modest diversification

The 3 months correlation between Shandong and Yunnan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Yunnan Yuntianhua Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Yuntianhua and Shandong Gold 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 Shandong Gold Mining are associated (or correlated) with Yunnan Yuntianhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Yuntianhua has no effect on the direction of Shandong Gold i.e., Shandong Gold and Yunnan Yuntianhua go up and down completely randomly.

Pair Corralation between Shandong Gold and Yunnan Yuntianhua

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Yunnan Yuntianhua. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.08 times less risky than Yunnan Yuntianhua. The stock trades about -0.16 of its potential returns per unit of risk. The Yunnan Yuntianhua Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,201  in Yunnan Yuntianhua Co on September 19, 2024 and sell it today you would earn a total of  45.00  from holding Yunnan Yuntianhua Co or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Shandong Gold Mining  vs.  Yunnan Yuntianhua Co

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining 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.

Yunnan Yuntianhua

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Yuntianhua Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Yuntianhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Gold and Yunnan Yuntianhua

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

The idea behind Shandong Gold Mining and Yunnan Yuntianhua Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.