Correlation Between Yindu Kitchen and Guangzhou Seagull

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

By analyzing existing cross correlation between Yindu Kitchen Equipment and Guangzhou Seagull Kitchen, you can compare the effects of market volatilities on Yindu Kitchen and Guangzhou Seagull 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 Yindu Kitchen with a short position of Guangzhou Seagull. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yindu Kitchen and Guangzhou Seagull.

Diversification Opportunities for Yindu Kitchen and Guangzhou Seagull

-0.31

Correlation Coefficient

Yindu Kitchen  Guangzhou Seagull

Very good diversification

The 3 months correlation between Yindu and Guangzhou is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Yindu Kitchen Equipment and Guangzhou Seagull Kitchen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Seagull Kitchen and Yindu Kitchen 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 Yindu Kitchen Equipment are associated (or correlated) with Guangzhou Seagull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Seagull Kitchen has no effect on the direction of Yindu Kitchen i.e., Yindu Kitchen and Guangzhou Seagull go up and down completely randomly.

Pair Corralation between Yindu Kitchen and Guangzhou Seagull

Assuming the 90 days trading horizon Yindu Kitchen Equipment is expected to generate 1.17 times more return on investment than Guangzhou Seagull. However, Yindu Kitchen is 1.17 times more volatile than Guangzhou Seagull Kitchen. It trades about 0.22 of its potential returns per unit of risk. Guangzhou Seagull Kitchen is currently generating about 0.0 per unit of risk. If you would invest  2,566  in Yindu Kitchen Equipment on December 10, 2024 and sell it today you would earn a total of  227.00  from holding Yindu Kitchen Equipment or generate 8.85% return on investment over 90 days.

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

Yindu Kitchen Equipment  vs.  Guangzhou Seagull Kitchen

Yindu Kitchen Equipment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yindu Kitchen Equipment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yindu Kitchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Seagull Kitchen 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.

Pair Trading with Yindu Kitchen and Guangzhou Seagull

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

The idea behind Yindu Kitchen Equipment and Guangzhou Seagull Kitchen 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.