Correlation Between Hunan Tyen and Blue Sail

Can any of the company-specific risk be diversified away by investing in both Hunan Tyen and Blue Sail 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 Hunan Tyen and Blue Sail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Tyen Machinery and Blue Sail Medical, you can compare the effects of market volatilities on Hunan Tyen and Blue Sail 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 Hunan Tyen with a short position of Blue Sail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and Blue Sail.

Diversification Opportunities for Hunan Tyen and Blue Sail

0.85

Correlation Coefficient

Hunan Tyen  Blue Sail

Very poor diversification

The 3 months correlation between Hunan and Blue is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and Blue Sail Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sail Medical and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with Blue Sail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sail Medical has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and Blue Sail go up and down completely randomly.

Pair Corralation between Hunan Tyen and Blue Sail

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 1.57 times more return on investment than Blue Sail. However, Hunan Tyen is 1.57 times more volatile than Blue Sail Medical. It trades about 0.03 of its potential returns per unit of risk. Blue Sail Medical is currently generating about -0.03 per unit of risk. If you would invest  476.00  in Hunan Tyen Machinery on September 21, 2024 and sell it today you would earn a total of  86.00  from holding Hunan Tyen Machinery or generate 18.07% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  Blue Sail Medical

Hunan Tyen Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

Blue Sail Medical

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Hunan Tyen and Blue Sail

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

The idea behind Hunan Tyen Machinery and Blue Sail Medical 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.