Correlation Between Yunnan Jianzhijia and Wanhua Chemical

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

Diversification Opportunities for Yunnan Jianzhijia and Wanhua Chemical

0.14

Correlation Coefficient

Yunnan Jianzhijia  Wanhua Chemical

Average diversification

The 3 months correlation between Yunnan and Wanhua is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Jianzhijia Health Chain and Wanhua Chemical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wanhua Chemical Group 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 Wanhua Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wanhua Chemical Group has no effect on the direction of Yunnan Jianzhijia i.e., Yunnan Jianzhijia and Wanhua Chemical go up and down completely randomly.

Pair Corralation between Yunnan Jianzhijia and Wanhua Chemical

Assuming the 90 days trading horizon Yunnan Jianzhijia Health Chain is expected to generate 1.63 times more return on investment than Wanhua Chemical. However, Yunnan Jianzhijia is 1.63 times more volatile than Wanhua Chemical Group. It trades about 0.19 of its potential returns per unit of risk. Wanhua Chemical Group is currently generating about 0.03 per unit of risk. If you would invest  1,765  in Yunnan Jianzhijia Health Chain on September 15, 2024 and sell it today you would earn a total of  915.00  from holding Yunnan Jianzhijia Health Chain or generate 51.84% 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.  Wanhua Chemical Group

Yunnan Jianzhijia

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Jianzhijia Health Chain are ranked lower than 15 (%) 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.

Wanhua Chemical Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wanhua Chemical Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wanhua Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yunnan Jianzhijia and Wanhua Chemical

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

The idea behind Yunnan Jianzhijia Health Chain and Wanhua Chemical Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.