Correlation Between Youyou Foods and Penyao Environmental

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Can any of the company-specific risk be diversified away by investing in both Youyou Foods and Penyao Environmental 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 Penyao Environmental 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 Penyao Environmental Protection, you can compare the effects of market volatilities on Youyou Foods and Penyao Environmental 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 Penyao Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youyou Foods and Penyao Environmental.

Diversification Opportunities for Youyou Foods and Penyao Environmental

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Youyou and Penyao is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Youyou Foods Co and Penyao Environmental Protectio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penyao Environmental 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 Penyao Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penyao Environmental has no effect on the direction of Youyou Foods i.e., Youyou Foods and Penyao Environmental go up and down completely randomly.

Pair Corralation between Youyou Foods and Penyao Environmental

Assuming the 90 days trading horizon Youyou Foods Co is expected to generate 1.04 times more return on investment than Penyao Environmental. However, Youyou Foods is 1.04 times more volatile than Penyao Environmental Protection. It trades about -0.09 of its potential returns per unit of risk. Penyao Environmental Protection is currently generating about -0.14 per unit of risk. If you would invest  1,094  in Youyou Foods Co on September 29, 2024 and sell it today you would lose (76.00) from holding Youyou Foods Co or give up 6.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Youyou Foods Co  vs.  Penyao Environmental Protectio

 Performance 
       Timeline  
Youyou Foods 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Youyou Foods Co are ranked lower than 13 (%) 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.
Penyao Environmental 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Youyou Foods and Penyao Environmental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Youyou Foods and Penyao Environmental

The main advantage of trading using opposite Youyou Foods and Penyao Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Youyou Foods position performs unexpectedly, Penyao Environmental 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 Penyao Environmental will offset losses from the drop in Penyao Environmental's long position.
The idea behind Youyou Foods Co and Penyao Environmental Protection 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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