Correlation Between Hunan Tyen and YLZ Information

Can any of the company-specific risk be diversified away by investing in both Hunan Tyen and YLZ Information 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 YLZ Information 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 YLZ Information Tech, you can compare the effects of market volatilities on Hunan Tyen and YLZ Information 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 YLZ Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and YLZ Information.

Diversification Opportunities for Hunan Tyen and YLZ Information

0.73

Correlation Coefficient

Hunan Tyen  YLZ Information

Poor diversification

The 3 months correlation between Hunan and YLZ is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and YLZ Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YLZ Information Tech 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 YLZ Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YLZ Information Tech has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and YLZ Information go up and down completely randomly.

Pair Corralation between Hunan Tyen and YLZ Information

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 1.53 times more return on investment than YLZ Information. However, Hunan Tyen is 1.53 times more volatile than YLZ Information Tech. It trades about -0.09 of its potential returns per unit of risk. YLZ Information Tech is currently generating about -0.46 per unit of risk. If you would invest  550.00  in Hunan Tyen Machinery on October 8, 2024 and sell it today you would lose (48.00) from holding Hunan Tyen Machinery or give up 8.73% of portfolio value over 90 days.

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

Hunan Tyen Machinery  vs.  YLZ Information Tech

Hunan Tyen Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

YLZ Information Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YLZ Information Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hunan Tyen and YLZ Information

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

The idea behind Hunan Tyen Machinery and YLZ Information Tech 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.