Correlation Between JuneYao Dairy and China Life

Can any of the company-specific risk be diversified away by investing in both JuneYao Dairy and China Life 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 China Life 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 China Life Insurance, you can compare the effects of market volatilities on JuneYao Dairy and China Life 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 China Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of JuneYao Dairy and China Life.

Diversification Opportunities for JuneYao Dairy and China Life

-0.17

Correlation Coefficient

JuneYao Dairy  China Life

Good diversification

The 3 months correlation between JuneYao and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding JuneYao Dairy Co and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of JuneYao Dairy i.e., JuneYao Dairy and China Life go up and down completely randomly.

Pair Corralation between JuneYao Dairy and China Life

Assuming the 90 days trading horizon JuneYao Dairy Co is expected to under-perform the China Life. In addition to that, JuneYao Dairy is 1.67 times more volatile than China Life Insurance. It trades about -0.03 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.1 per unit of volatility. If you would invest  2,653  in China Life Insurance on October 9, 2024 and sell it today you would earn a total of  1,242  from holding China Life Insurance or generate 46.81% return on investment over 90 days.

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

JuneYao Dairy Co  vs.  China Life Insurance

JuneYao Dairy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 3 (%) 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.

China Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with JuneYao Dairy and China Life

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

The idea behind JuneYao Dairy Co and China Life Insurance 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.