Correlation Between Zhejiang Yongjin and Shanghai Sanyou

Can any of the company-specific risk be diversified away by investing in both Zhejiang Yongjin and Shanghai Sanyou 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 Zhejiang Yongjin and Shanghai Sanyou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Yongjin Metal and Shanghai Sanyou Medical, you can compare the effects of market volatilities on Zhejiang Yongjin and Shanghai Sanyou 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 Zhejiang Yongjin with a short position of Shanghai Sanyou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yongjin and Shanghai Sanyou.

Diversification Opportunities for Zhejiang Yongjin and Shanghai Sanyou

-0.65

Correlation Coefficient

Zhejiang Yongjin  Shanghai Sanyou

Excellent diversification

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

Pair Corralation between Zhejiang Yongjin and Shanghai Sanyou

Assuming the 90 days trading horizon Zhejiang Yongjin Metal is expected to generate 0.78 times more return on investment than Shanghai Sanyou. However, Zhejiang Yongjin Metal is 1.29 times less risky than Shanghai Sanyou. It trades about 0.1 of its potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about -0.1 per unit of risk. If you would invest  1,895  in Zhejiang Yongjin Metal on December 27, 2024 and sell it today you would earn a total of  186.00  from holding Zhejiang Yongjin Metal or generate 9.82% return on investment over 90 days.

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

Zhejiang Yongjin Metal  vs.  Shanghai Sanyou Medical

Zhejiang Yongjin Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yongjin Metal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yongjin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shanghai Sanyou Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Sanyou Medical 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.

Pair Trading with Zhejiang Yongjin and Shanghai Sanyou

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

The idea behind Zhejiang Yongjin Metal and Shanghai Sanyou Medical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.