Correlation Between Shaanxi Lighte and Youyou Foods

Can any of the company-specific risk be diversified away by investing in both Shaanxi Lighte and Youyou Foods 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 Shaanxi Lighte and Youyou Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaanxi Lighte Optoelectronics and Youyou Foods Co, you can compare the effects of market volatilities on Shaanxi Lighte and Youyou Foods 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 Shaanxi Lighte with a short position of Youyou Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Lighte and Youyou Foods.

Diversification Opportunities for Shaanxi Lighte and Youyou Foods

-0.46

Correlation Coefficient

Shaanxi Lighte  Youyou Foods

Very good diversification

The 3 months correlation between Shaanxi and Youyou is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Lighte Optoelectronics and Youyou Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youyou Foods and Shaanxi Lighte 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 Shaanxi Lighte Optoelectronics are associated (or correlated) with Youyou Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youyou Foods has no effect on the direction of Shaanxi Lighte i.e., Shaanxi Lighte and Youyou Foods go up and down completely randomly.

Pair Corralation between Shaanxi Lighte and Youyou Foods

Assuming the 90 days trading horizon Shaanxi Lighte Optoelectronics is expected to under-perform the Youyou Foods. But the stock apears to be less risky and, when comparing its historical volatility, Shaanxi Lighte Optoelectronics is 1.02 times less risky than Youyou Foods. The stock trades about -0.07 of its potential returns per unit of risk. The Youyou Foods Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,004  in Youyou Foods Co on December 25, 2024 and sell it today you would lose (8.00) from holding Youyou Foods Co or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shaanxi Lighte Optoelectronics  vs.  Youyou Foods Co

Shaanxi Lighte Optoe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shaanxi Lighte Optoelectronics 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.

Youyou Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Youyou Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Youyou Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shaanxi Lighte and Youyou Foods

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

The idea behind Shaanxi Lighte Optoelectronics and Youyou Foods Co 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 Stocks Directory module to find actively traded stocks across global markets.