Correlation Between Yantai North and Hunan Oil

Can any of the company-specific risk be diversified away by investing in both Yantai North and Hunan Oil 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 Hunan Oil 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 Hunan Oil Pump, you can compare the effects of market volatilities on Yantai North and Hunan Oil 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 Hunan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yantai North and Hunan Oil.

Diversification Opportunities for Yantai North and Hunan Oil

0.71

Correlation Coefficient

Yantai North  Hunan Oil

Poor diversification

The 3 months correlation between Yantai and Hunan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Yantai North Andre and Hunan Oil Pump in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Oil Pump 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 Hunan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Oil Pump has no effect on the direction of Yantai North i.e., Yantai North and Hunan Oil go up and down completely randomly.

Pair Corralation between Yantai North and Hunan Oil

Assuming the 90 days trading horizon Yantai North Andre is expected to generate 0.73 times more return on investment than Hunan Oil. However, Yantai North Andre is 1.36 times less risky than Hunan Oil. It trades about 0.03 of its potential returns per unit of risk. Hunan Oil Pump is currently generating about -0.05 per unit of risk. If you would invest  2,665  in Yantai North Andre on October 6, 2024 and sell it today you would earn a total of  58.00  from holding Yantai North Andre or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Yantai North Andre  vs.  Hunan Oil Pump

Yantai North Andre

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hunan Oil Pump

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Oil Pump are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Oil may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Yantai North and Hunan Oil

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

The idea behind Yantai North Andre and Hunan Oil Pump 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.