Correlation Between Ping An and Yuan Longping

Can any of the company-specific risk be diversified away by investing in both Ping An and Yuan Longping 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 Ping An and Yuan Longping into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Yuan Longping High tech, you can compare the effects of market volatilities on Ping An and Yuan Longping 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 Ping An with a short position of Yuan Longping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Yuan Longping.

Diversification Opportunities for Ping An and Yuan Longping

0.86

Correlation Coefficient

Ping An  Yuan Longping

Very poor diversification

The 3 months correlation between Ping and Yuan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Yuan Longping High tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan Longping High and Ping An 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 Ping An Insurance are associated (or correlated) with Yuan Longping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan Longping High has no effect on the direction of Ping An i.e., Ping An and Yuan Longping go up and down completely randomly.

Pair Corralation between Ping An and Yuan Longping

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.08 times more return on investment than Yuan Longping. However, Ping An is 1.08 times more volatile than Yuan Longping High tech. It trades about 0.13 of its potential returns per unit of risk. Yuan Longping High tech is currently generating about 0.14 per unit of risk. If you would invest  4,370  in Ping An Insurance on September 14, 2024 and sell it today you would earn a total of  1,004  from holding Ping An Insurance or generate 22.97% return on investment over 90 days.

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

Ping An Insurance  vs.  Yuan Longping High tech

Ping An Insurance

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Yuan Longping High

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan Longping High tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuan Longping sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Yuan Longping

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

The idea behind Ping An Insurance and Yuan Longping High 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.