Correlation Between Youyou Foods Co and China Energy

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

Diversification Opportunities for Youyou Foods Co and China Energy

0.45

Correlation Coefficient

Youyou Foods Co  China Energy

Very weak diversification

The 3 months correlation between Youyou and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Youyou Foods Co and China Energy Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Energy Engineering 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 China Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Energy Engineering has no effect on the direction of Youyou Foods Co i.e., Youyou Foods Co and China Energy go up and down completely randomly.

Pair Corralation between Youyou Foods Co and China Energy

Assuming the 90 days trading horizon Youyou Foods Co is expected to under-perform the China Energy. In addition to that, Youyou Foods Co is 2.22 times more volatile than China Energy Engineering. It trades about -0.1 of its total potential returns per unit of risk. China Energy Engineering is currently generating about -0.03 per unit of volatility. If you would invest  236.00  in China Energy Engineering on December 2, 2024 and sell it today you would lose (6.00) from holding China Energy Engineering or give up 2.54% of portfolio value over 90 days.

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

Youyou Foods Co  vs.  China Energy Engineering

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.

China Energy Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Energy Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Youyou Foods Co and China Energy

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

The idea behind Youyou Foods Co and China Energy Engineering 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.