Correlation Between Yantai North and Eternal Asia

Can any of the company-specific risk be diversified away by investing in both Yantai North and Eternal Asia 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 Yantai North and Eternal Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yantai North Andre and Eternal Asia Supply, you can compare the effects of market volatilities on Yantai North and Eternal Asia 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 Yantai North with a short position of Eternal Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yantai North and Eternal Asia.

Diversification Opportunities for Yantai North and Eternal Asia

-0.21

Correlation Coefficient

Yantai North  Eternal Asia

Very good diversification

The 3 months correlation between Yantai and Eternal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Yantai North Andre and Eternal Asia Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Asia Supply and Yantai North 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 Yantai North Andre are associated (or correlated) with Eternal Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Asia Supply has no effect on the direction of Yantai North i.e., Yantai North and Eternal Asia go up and down completely randomly.

Pair Corralation between Yantai North and Eternal Asia

Assuming the 90 days trading horizon Yantai North Andre is expected to generate 0.98 times more return on investment than Eternal Asia. However, Yantai North Andre is 1.02 times less risky than Eternal Asia. It trades about 0.12 of its potential returns per unit of risk. Eternal Asia Supply is currently generating about -0.11 per unit of risk. If you would invest  2,482  in Yantai North Andre on October 26, 2024 and sell it today you would earn a total of  503.00  from holding Yantai North Andre or generate 20.27% return on investment over 90 days.

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

Yantai North Andre  vs.  Eternal Asia Supply

Yantai North Andre

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Yantai North Andre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Yantai North sustained solid returns over the last few months and may actually be approaching a breakup point.

Eternal Asia Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eternal Asia Supply 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Yantai North and Eternal Asia

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

The idea behind Yantai North Andre and Eternal Asia Supply 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.