Correlation Between China Marine and Youyou Foods

Can any of the company-specific risk be diversified away by investing in both China Marine and Youyou Foods 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 China Marine and Youyou Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Marine Information and Youyou Foods Co, you can compare the effects of market volatilities on China Marine and Youyou Foods 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 China Marine with a short position of Youyou Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Marine and Youyou Foods.

Diversification Opportunities for China Marine and Youyou Foods

-0.58

Correlation Coefficient

China Marine  Youyou Foods

Excellent diversification

The 3 months correlation between China and Youyou is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Marine Information and Youyou Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youyou Foods and China Marine 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 China Marine Information are associated (or correlated) with Youyou Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youyou Foods has no effect on the direction of China Marine i.e., China Marine and Youyou Foods go up and down completely randomly.

Pair Corralation between China Marine and Youyou Foods

Assuming the 90 days trading horizon China Marine Information is expected to under-perform the Youyou Foods. But the stock apears to be less risky and, when comparing its historical volatility, China Marine Information is 1.23 times less risky than Youyou Foods. The stock trades about -0.1 of its potential returns per unit of risk. The Youyou Foods Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  668.00  in Youyou Foods Co on October 25, 2024 and sell it today you would earn a total of  325.00  from holding Youyou Foods Co or generate 48.65% return on investment over 90 days.

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

China Marine Information  vs.  Youyou Foods Co

China Marine Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Marine Information 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.

Youyou Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Youyou Foods Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youyou Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Marine and Youyou Foods

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

The idea behind China Marine Information and Youyou Foods 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.