Correlation Between Youyou Foods and Eyebright Medical

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

Diversification Opportunities for Youyou Foods and Eyebright Medical

0.16

Correlation Coefficient

Youyou Foods  Eyebright Medical

Average diversification

The 3 months correlation between Youyou and Eyebright is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Youyou Foods Co and Eyebright Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyebright Medical 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 Eyebright Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyebright Medical has no effect on the direction of Youyou Foods i.e., Youyou Foods and Eyebright Medical go up and down completely randomly.

Pair Corralation between Youyou Foods and Eyebright Medical

Assuming the 90 days trading horizon Youyou Foods Co is expected to generate 0.86 times more return on investment than Eyebright Medical. However, Youyou Foods Co is 1.17 times less risky than Eyebright Medical. It trades about 0.16 of its potential returns per unit of risk. Eyebright Medical Technology is currently generating about 0.07 per unit of risk. If you would invest  585.00  in Youyou Foods Co on September 29, 2024 and sell it today you would earn a total of  433.00  from holding Youyou Foods Co or generate 74.02% return on investment over 90 days.

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

Youyou Foods Co  vs.  Eyebright Medical Technology

Youyou Foods

Risk-Adjusted Performance

13 of 100

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.

Eyebright Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyebright Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eyebright Medical 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 and Eyebright Medical

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

The idea behind Youyou Foods Co and Eyebright Medical Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.