Correlation Between Hengdian Entertainment and Yankershop Food

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

By analyzing existing cross correlation between Hengdian Entertainment Co and Yankershop Food Co, you can compare the effects of market volatilities on Hengdian Entertainment and Yankershop Food 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 Hengdian Entertainment with a short position of Yankershop Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Yankershop Food.

Diversification Opportunities for Hengdian Entertainment and Yankershop Food

0.65

Correlation Coefficient

Hengdian Entertainment  Yankershop Food

Poor diversification

The 3 months correlation between Hengdian and Yankershop is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Yankershop Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yankershop Food and Hengdian Entertainment 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 Hengdian Entertainment Co are associated (or correlated) with Yankershop Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yankershop Food has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Yankershop Food go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Yankershop Food

Assuming the 90 days trading horizon Hengdian Entertainment is expected to generate 1.3 times less return on investment than Yankershop Food. In addition to that, Hengdian Entertainment is 1.31 times more volatile than Yankershop Food Co. It trades about 0.02 of its total potential returns per unit of risk. Yankershop Food Co is currently generating about 0.03 per unit of volatility. If you would invest  4,689  in Yankershop Food Co on September 22, 2024 and sell it today you would earn a total of  1,293  from holding Yankershop Food Co or generate 27.58% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Yankershop Food Co

Hengdian Entertainment

Risk-Adjusted Performance

16 of 100

Solid

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

Yankershop Food

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yankershop Food Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yankershop Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengdian Entertainment and Yankershop Food

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

The idea behind Hengdian Entertainment Co and Yankershop Food Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.