Correlation Between Ye Chiu and Sinomach General

Can any of the company-specific risk be diversified away by investing in both Ye Chiu and Sinomach General 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 Ye Chiu and Sinomach General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ye Chiu Metal and Sinomach General Machinery, you can compare the effects of market volatilities on Ye Chiu and Sinomach General 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 Ye Chiu with a short position of Sinomach General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ye Chiu and Sinomach General.

Diversification Opportunities for Ye Chiu and Sinomach General

0.81

Correlation Coefficient

Ye Chiu  Sinomach General

Very poor diversification

The 3 months correlation between 601388 and Sinomach is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ye Chiu Metal and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac and Ye Chiu 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 Ye Chiu Metal are associated (or correlated) with Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Ye Chiu i.e., Ye Chiu and Sinomach General go up and down completely randomly.

Pair Corralation between Ye Chiu and Sinomach General

Assuming the 90 days trading horizon Ye Chiu Metal is expected to under-perform the Sinomach General. But the stock apears to be less risky and, when comparing its historical volatility, Ye Chiu Metal is 1.02 times less risky than Sinomach General. The stock trades about -0.38 of its potential returns per unit of risk. The Sinomach General Machinery is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest  1,681  in Sinomach General Machinery on October 8, 2024 and sell it today you would lose (265.00) from holding Sinomach General Machinery or give up 15.76% of portfolio value over 90 days.

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

Ye Chiu Metal  vs.  Sinomach General Machinery

Ye Chiu Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ye Chiu Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sinomach General Mac

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ye Chiu and Sinomach General

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

The idea behind Ye Chiu Metal and Sinomach General Machinery 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.