Correlation Between Industrial and Yantai North

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

By analyzing existing cross correlation between Industrial and Commercial and Yantai North Andre, you can compare the effects of market volatilities on Industrial and Yantai North 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 Industrial with a short position of Yantai North. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Yantai North.

Diversification Opportunities for Industrial and Yantai North

0.69

Correlation Coefficient

Industrial  Yantai North

Poor diversification

The 3 months correlation between Industrial and Yantai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Yantai North Andre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai North Andre and Industrial 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 Industrial and Commercial are associated (or correlated) with Yantai North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai North Andre has no effect on the direction of Industrial i.e., Industrial and Yantai North go up and down completely randomly.

Pair Corralation between Industrial and Yantai North

Assuming the 90 days trading horizon Industrial is expected to generate 3.48 times less return on investment than Yantai North. But when comparing it to its historical volatility, Industrial and Commercial is 2.51 times less risky than Yantai North. It trades about 0.15 of its potential returns per unit of risk. Yantai North Andre is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,022  in Yantai North Andre on September 13, 2024 and sell it today you would earn a total of  1,058  from holding Yantai North Andre or generate 52.32% return on investment over 90 days.

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

Industrial and Commercial  vs.  Yantai North Andre

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Yantai North Andre

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai North sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Yantai North

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

The idea behind Industrial and Commercial and Yantai North Andre 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.