Correlation Between Duzhe Publishing and Sichuan Yahua

Can any of the company-specific risk be diversified away by investing in both Duzhe Publishing and Sichuan Yahua 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 Duzhe Publishing and Sichuan Yahua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duzhe Publishing Media and Sichuan Yahua Industrial, you can compare the effects of market volatilities on Duzhe Publishing and Sichuan Yahua 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 Duzhe Publishing with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duzhe Publishing and Sichuan Yahua.

Diversification Opportunities for Duzhe Publishing and Sichuan Yahua

0.93

Correlation Coefficient

Duzhe Publishing  Sichuan Yahua

Almost no diversification

The 3 months correlation between Duzhe and Sichuan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Duzhe Publishing Media and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and Duzhe Publishing 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 Duzhe Publishing Media are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of Duzhe Publishing i.e., Duzhe Publishing and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Duzhe Publishing and Sichuan Yahua

Assuming the 90 days trading horizon Duzhe Publishing Media is expected to generate 1.31 times more return on investment than Sichuan Yahua. However, Duzhe Publishing is 1.31 times more volatile than Sichuan Yahua Industrial. It trades about 0.25 of its potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.22 per unit of risk. If you would invest  575.00  in Duzhe Publishing Media on September 19, 2024 and sell it today you would earn a total of  133.00  from holding Duzhe Publishing Media or generate 23.13% return on investment over 90 days.

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

Duzhe Publishing Media  vs.  Sichuan Yahua Industrial

Duzhe Publishing Media

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Duzhe Publishing Media are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duzhe Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Yahua Industrial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duzhe Publishing and Sichuan Yahua

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

The idea behind Duzhe Publishing Media and Sichuan Yahua Industrial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.