Correlation Between Dawning Information and Yonyou Auto

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

By analyzing existing cross correlation between Dawning Information Industry and Yonyou Auto Information, you can compare the effects of market volatilities on Dawning Information and Yonyou Auto 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 Dawning Information with a short position of Yonyou Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawning Information and Yonyou Auto.

Diversification Opportunities for Dawning Information and Yonyou Auto

0.67

Correlation Coefficient

Dawning Information  Yonyou Auto

Poor diversification

The 3 months correlation between Dawning and Yonyou is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and Yonyou Auto Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yonyou Auto Information and Dawning Information 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 Dawning Information Industry are associated (or correlated) with Yonyou Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yonyou Auto Information has no effect on the direction of Dawning Information i.e., Dawning Information and Yonyou Auto go up and down completely randomly.

Pair Corralation between Dawning Information and Yonyou Auto

Assuming the 90 days trading horizon Dawning Information Industry is expected to under-perform the Yonyou Auto. In addition to that, Dawning Information is 1.22 times more volatile than Yonyou Auto Information. It trades about -0.06 of its total potential returns per unit of risk. Yonyou Auto Information is currently generating about 0.03 per unit of volatility. If you would invest  1,816  in Yonyou Auto Information on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Yonyou Auto Information or generate 2.31% return on investment over 90 days.

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

Dawning Information Industry  vs.  Yonyou Auto Information

Dawning Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dawning Information Industry 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.

Yonyou Auto Information

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yonyou Auto Information are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yonyou Auto is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dawning Information and Yonyou Auto

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

The idea behind Dawning Information Industry and Yonyou Auto Information 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.