Correlation Between Youyou Foods and Shantou Wanshun

Can any of the company-specific risk be diversified away by investing in both Youyou Foods and Shantou Wanshun 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 Youyou Foods and Shantou Wanshun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Youyou Foods Co and Shantou Wanshun Package, you can compare the effects of market volatilities on Youyou Foods and Shantou Wanshun 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 Youyou Foods with a short position of Shantou Wanshun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youyou Foods and Shantou Wanshun.

Diversification Opportunities for Youyou Foods and Shantou Wanshun

0.29

Correlation Coefficient

Youyou Foods  Shantou Wanshun

Modest diversification

The 3 months correlation between Youyou and Shantou is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Youyou Foods Co and Shantou Wanshun Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantou Wanshun Package and Youyou Foods 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 Youyou Foods Co are associated (or correlated) with Shantou Wanshun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantou Wanshun Package has no effect on the direction of Youyou Foods i.e., Youyou Foods and Shantou Wanshun go up and down completely randomly.

Pair Corralation between Youyou Foods and Shantou Wanshun

Assuming the 90 days trading horizon Youyou Foods Co is expected to generate 1.36 times more return on investment than Shantou Wanshun. However, Youyou Foods is 1.36 times more volatile than Shantou Wanshun Package. It trades about -0.09 of its potential returns per unit of risk. Shantou Wanshun Package is currently generating about -0.39 per unit of risk. If you would invest  1,080  in Youyou Foods Co on October 2, 2024 and sell it today you would lose (62.00) from holding Youyou Foods Co or give up 5.74% of portfolio value over 90 days.

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

Youyou Foods Co  vs.  Shantou Wanshun Package

Youyou Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Youyou Foods Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youyou Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Youyou Foods and Shantou Wanshun

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

The idea behind Youyou Foods Co and Shantou Wanshun Package 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.