Correlation Between Youyou Foods Co and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both Youyou Foods Co and Gansu Jiu 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 Co and Gansu Jiu 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 Gansu Jiu Steel, you can compare the effects of market volatilities on Youyou Foods Co and Gansu Jiu 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 Co with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youyou Foods Co and Gansu Jiu.

Diversification Opportunities for Youyou Foods Co and Gansu Jiu

0.65

Correlation Coefficient

Youyou Foods Co  Gansu Jiu

Poor diversification

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

Pair Corralation between Youyou Foods Co and Gansu Jiu

Assuming the 90 days trading horizon Youyou Foods Co is expected to under-perform the Gansu Jiu. In addition to that, Youyou Foods Co is 1.2 times more volatile than Gansu Jiu Steel. It trades about -0.1 of its total potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.09 per unit of volatility. If you would invest  171.00  in Gansu Jiu Steel on December 3, 2024 and sell it today you would lose (20.00) from holding Gansu Jiu Steel or give up 11.7% of portfolio value over 90 days.

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

Youyou Foods Co  vs.  Gansu Jiu Steel

Youyou Foods Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Youyou Foods Co 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.

Gansu Jiu Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Jiu Steel 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 Youyou Foods Co and Gansu Jiu

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

The idea behind Youyou Foods Co and Gansu Jiu Steel 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.