Correlation Between Yunnan Jianzhijia and Shenwu Energy

Can any of the company-specific risk be diversified away by investing in both Yunnan Jianzhijia and Shenwu Energy 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 Yunnan Jianzhijia and Shenwu Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yunnan Jianzhijia Health Chain and Shenwu Energy Saving, you can compare the effects of market volatilities on Yunnan Jianzhijia and Shenwu Energy 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 Yunnan Jianzhijia with a short position of Shenwu Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Jianzhijia and Shenwu Energy.

Diversification Opportunities for Yunnan Jianzhijia and Shenwu Energy

0.6

Correlation Coefficient

Yunnan Jianzhijia  Shenwu Energy

Poor diversification

The 3 months correlation between Yunnan and Shenwu is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Jianzhijia Health Chain and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and Yunnan Jianzhijia 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 Yunnan Jianzhijia Health Chain are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of Yunnan Jianzhijia i.e., Yunnan Jianzhijia and Shenwu Energy go up and down completely randomly.

Pair Corralation between Yunnan Jianzhijia and Shenwu Energy

Assuming the 90 days trading horizon Yunnan Jianzhijia Health Chain is expected to generate 0.72 times more return on investment than Shenwu Energy. However, Yunnan Jianzhijia Health Chain is 1.39 times less risky than Shenwu Energy. It trades about -0.25 of its potential returns per unit of risk. Shenwu Energy Saving is currently generating about -0.18 per unit of risk. If you would invest  2,540  in Yunnan Jianzhijia Health Chain on October 11, 2024 and sell it today you would lose (415.00) from holding Yunnan Jianzhijia Health Chain or give up 16.34% of portfolio value over 90 days.

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

Yunnan Jianzhijia Health Chain  vs.  Shenwu Energy Saving

Yunnan Jianzhijia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenwu Energy Saving

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yunnan Jianzhijia and Shenwu Energy

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

The idea behind Yunnan Jianzhijia Health Chain and Shenwu Energy Saving 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.