Correlation Between Sichuan Hebang and Yili Chuanning

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

By analyzing existing cross correlation between Sichuan Hebang Biotechnology and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Sichuan Hebang and Yili Chuanning 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 Sichuan Hebang with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Hebang and Yili Chuanning.

Diversification Opportunities for Sichuan Hebang and Yili Chuanning

-0.36

Correlation Coefficient

Sichuan Hebang  Yili Chuanning

Very good diversification

The 3 months correlation between Sichuan and Yili is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Hebang Biotechnology and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Sichuan Hebang 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 Sichuan Hebang Biotechnology are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Sichuan Hebang i.e., Sichuan Hebang and Yili Chuanning go up and down completely randomly.

Pair Corralation between Sichuan Hebang and Yili Chuanning

Assuming the 90 days trading horizon Sichuan Hebang Biotechnology is expected to under-perform the Yili Chuanning. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Hebang Biotechnology is 1.89 times less risky than Yili Chuanning. The stock trades about -0.18 of its potential returns per unit of risk. The Yili Chuanning Biotechnology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,226  in Yili Chuanning Biotechnology on December 25, 2024 and sell it today you would earn a total of  33.00  from holding Yili Chuanning Biotechnology or generate 2.69% return on investment over 90 days.

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

Sichuan Hebang Biotechnology  vs.  Yili Chuanning Biotechnology

Sichuan Hebang Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Hebang Biotechnology 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Yili Chuanning Biote

Risk-Adjusted Performance

Weak

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

Pair Trading with Sichuan Hebang and Yili Chuanning

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

The idea behind Sichuan Hebang Biotechnology and Yili Chuanning Biotechnology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.