Correlation Between Yindu Kitchen and Zhejiang Huayou

Can any of the company-specific risk be diversified away by investing in both Yindu Kitchen and Zhejiang Huayou 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 Zhejiang Huayou 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 Zhejiang Huayou Cobalt, you can compare the effects of market volatilities on Yindu Kitchen and Zhejiang Huayou 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 Zhejiang Huayou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yindu Kitchen and Zhejiang Huayou.

Diversification Opportunities for Yindu Kitchen and Zhejiang Huayou

0.27

Correlation Coefficient

Yindu Kitchen  Zhejiang Huayou

Modest diversification

The 3 months correlation between Yindu and Zhejiang is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Yindu Kitchen Equipment and Zhejiang Huayou Cobalt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Huayou Cobalt 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 Zhejiang Huayou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Huayou Cobalt has no effect on the direction of Yindu Kitchen i.e., Yindu Kitchen and Zhejiang Huayou go up and down completely randomly.

Pair Corralation between Yindu Kitchen and Zhejiang Huayou

Assuming the 90 days trading horizon Yindu Kitchen Equipment is expected to generate 0.78 times more return on investment than Zhejiang Huayou. However, Yindu Kitchen Equipment is 1.29 times less risky than Zhejiang Huayou. It trades about -0.17 of its potential returns per unit of risk. Zhejiang Huayou Cobalt is currently generating about -0.4 per unit of risk. If you would invest  2,353  in Yindu Kitchen Equipment on October 5, 2024 and sell it today you would lose (109.00) from holding Yindu Kitchen Equipment or give up 4.63% of portfolio value over 90 days.

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

Yindu Kitchen Equipment  vs.  Zhejiang Huayou Cobalt

Yindu Kitchen Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yindu Kitchen Equipment 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhejiang Huayou Cobalt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Huayou Cobalt 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.

Pair Trading with Yindu Kitchen and Zhejiang Huayou

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

The idea behind Yindu Kitchen Equipment and Zhejiang Huayou Cobalt 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.