Correlation Between JuneYao Dairy and Sichuan Yahua

Can any of the company-specific risk be diversified away by investing in both JuneYao Dairy 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 JuneYao Dairy and Sichuan Yahua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JuneYao Dairy Co and Sichuan Yahua Industrial, you can compare the effects of market volatilities on JuneYao Dairy 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 JuneYao Dairy with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of JuneYao Dairy and Sichuan Yahua.

Diversification Opportunities for JuneYao Dairy and Sichuan Yahua

0.87

Correlation Coefficient

JuneYao Dairy  Sichuan Yahua

Very poor diversification

The 3 months correlation between JuneYao and Sichuan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JuneYao Dairy Co 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 JuneYao Dairy 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 JuneYao Dairy Co 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 JuneYao Dairy i.e., JuneYao Dairy and Sichuan Yahua go up and down completely randomly.

Pair Corralation between JuneYao Dairy and Sichuan Yahua

Assuming the 90 days trading horizon JuneYao Dairy Co is expected to under-perform the Sichuan Yahua. In addition to that, JuneYao Dairy is 1.41 times more volatile than Sichuan Yahua Industrial. It trades about -0.24 of its total potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about -0.17 per unit of volatility. If you would invest  1,282  in Sichuan Yahua Industrial on October 12, 2024 and sell it today you would lose (138.00) from holding Sichuan Yahua Industrial or give up 10.76% of portfolio value over 90 days.

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

JuneYao Dairy Co  vs.  Sichuan Yahua Industrial

JuneYao Dairy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JuneYao Dairy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sichuan Yahua Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JuneYao Dairy and Sichuan Yahua

The main advantage of trading using opposite JuneYao Dairy and Sichuan Yahua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JuneYao Dairy 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 JuneYao Dairy Co 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.