Correlation Between Yunnan Jianzhijia and Shandong Sino

Can any of the company-specific risk be diversified away by investing in both Yunnan Jianzhijia and Shandong Sino 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 Shandong Sino 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 Shandong Sino Agri United, you can compare the effects of market volatilities on Yunnan Jianzhijia and Shandong Sino 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 Shandong Sino. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Jianzhijia and Shandong Sino.

Diversification Opportunities for Yunnan Jianzhijia and Shandong Sino

0.85

Correlation Coefficient

Yunnan Jianzhijia  Shandong Sino

Very poor diversification

The 3 months correlation between Yunnan and Shandong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Jianzhijia Health Chain and Shandong Sino Agri United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sino Agri 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 Shandong Sino. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sino Agri has no effect on the direction of Yunnan Jianzhijia i.e., Yunnan Jianzhijia and Shandong Sino go up and down completely randomly.

Pair Corralation between Yunnan Jianzhijia and Shandong Sino

Assuming the 90 days trading horizon Yunnan Jianzhijia Health Chain is expected to under-perform the Shandong Sino. But the stock apears to be less risky and, when comparing its historical volatility, Yunnan Jianzhijia Health Chain is 1.1 times less risky than Shandong Sino. The stock trades about -0.06 of its potential returns per unit of risk. The Shandong Sino Agri United is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Shandong Sino Agri United on September 3, 2024 and sell it today you would earn a total of  142.00  from holding Shandong Sino Agri United or generate 7.74% return on investment over 90 days.

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

Yunnan Jianzhijia Health Chain  vs.  Shandong Sino Agri United

Yunnan Jianzhijia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Jianzhijia Health Chain are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Jianzhijia sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Sino Agri

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sino Agri United are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sino sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yunnan Jianzhijia and Shandong Sino

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

The idea behind Yunnan Jianzhijia Health Chain and Shandong Sino Agri United 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.