Correlation Between Yunnan Jianzhijia and Sichuan Yahua

Can any of the company-specific risk be diversified away by investing in both Yunnan Jianzhijia 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 Yunnan Jianzhijia and Sichuan Yahua 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 Sichuan Yahua Industrial, you can compare the effects of market volatilities on Yunnan Jianzhijia 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 Yunnan Jianzhijia with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Jianzhijia and Sichuan Yahua.

Diversification Opportunities for Yunnan Jianzhijia and Sichuan Yahua

0.1

Correlation Coefficient

Yunnan Jianzhijia  Sichuan Yahua

Average diversification

The 3 months correlation between Yunnan and Sichuan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Jianzhijia Health Chain 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 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 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 Yunnan Jianzhijia i.e., Yunnan Jianzhijia and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Yunnan Jianzhijia and Sichuan Yahua

Assuming the 90 days trading horizon Yunnan Jianzhijia Health Chain is expected to under-perform the Sichuan Yahua. In addition to that, Yunnan Jianzhijia is 1.1 times more volatile than Sichuan Yahua Industrial. It trades about -0.08 of its total potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.08 per unit of volatility. If you would invest  1,190  in Sichuan Yahua Industrial on December 25, 2024 and sell it today you would earn a total of  113.00  from holding Sichuan Yahua Industrial or generate 9.5% return on investment over 90 days.

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

Yunnan Jianzhijia Health Chain  vs.  Sichuan Yahua Industrial

Yunnan Jianzhijia

Risk-Adjusted Performance

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 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.

Sichuan Yahua Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yunnan Jianzhijia and Sichuan Yahua

The main advantage of trading using opposite Yunnan Jianzhijia and Sichuan Yahua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yunnan Jianzhijia 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 Yunnan Jianzhijia Health Chain 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.