Correlation Between Fujian Oriental and YiDong Electronics

Can any of the company-specific risk be diversified away by investing in both Fujian Oriental and YiDong Electronics 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 Fujian Oriental and YiDong Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fujian Oriental Silver and YiDong Electronics Technology, you can compare the effects of market volatilities on Fujian Oriental and YiDong Electronics 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 Fujian Oriental with a short position of YiDong Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Oriental and YiDong Electronics.

Diversification Opportunities for Fujian Oriental and YiDong Electronics

-0.56

Correlation Coefficient

Fujian Oriental  YiDong Electronics

Excellent diversification

The 3 months correlation between Fujian and YiDong is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and YiDong Electronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YiDong Electronics and Fujian Oriental 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 Fujian Oriental Silver are associated (or correlated) with YiDong Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YiDong Electronics has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and YiDong Electronics go up and down completely randomly.

Pair Corralation between Fujian Oriental and YiDong Electronics

Assuming the 90 days trading horizon Fujian Oriental is expected to generate 32.58 times less return on investment than YiDong Electronics. But when comparing it to its historical volatility, Fujian Oriental Silver is 1.72 times less risky than YiDong Electronics. It trades about 0.01 of its potential returns per unit of risk. YiDong Electronics Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,167  in YiDong Electronics Technology on October 26, 2024 and sell it today you would earn a total of  213.00  from holding YiDong Electronics Technology or generate 9.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fujian Oriental Silver  vs.  YiDong Electronics Technology

Fujian Oriental Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Oriental Silver 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.

YiDong Electronics

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YiDong Electronics Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YiDong Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Oriental and YiDong Electronics

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

The idea behind Fujian Oriental Silver and YiDong Electronics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.