Correlation Between Yunnan Jianzhijia and Shandong Sinoglory

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

Diversification Opportunities for Yunnan Jianzhijia and Shandong Sinoglory

0.88

Correlation Coefficient

Yunnan Jianzhijia  Shandong Sinoglory

Very poor diversification

The 3 months correlation between Yunnan and Shandong is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Jianzhijia Health Chain and Shandong Sinoglory Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sinoglory Health 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 Sinoglory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sinoglory Health has no effect on the direction of Yunnan Jianzhijia i.e., Yunnan Jianzhijia and Shandong Sinoglory go up and down completely randomly.

Pair Corralation between Yunnan Jianzhijia and Shandong Sinoglory

Assuming the 90 days trading horizon Yunnan Jianzhijia Health Chain is expected to under-perform the Shandong Sinoglory. In addition to that, Yunnan Jianzhijia is 1.36 times more volatile than Shandong Sinoglory Health. It trades about -0.11 of its total potential returns per unit of risk. Shandong Sinoglory Health is currently generating about -0.07 per unit of volatility. If you would invest  1,228  in Shandong Sinoglory Health on September 24, 2024 and sell it today you would lose (44.00) from holding Shandong Sinoglory Health or give up 3.58% of portfolio value 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 Sinoglory Health

Yunnan Jianzhijia

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Jianzhijia Health Chain are ranked lower than 9 (%) 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 Sinoglory Health

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sinoglory sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yunnan Jianzhijia and Shandong Sinoglory

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

The idea behind Yunnan Jianzhijia Health Chain and Shandong Sinoglory Health 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.