Correlation Between Beijing YanDong and Jiangsu Yike

Can any of the company-specific risk be diversified away by investing in both Beijing YanDong and Jiangsu Yike 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 Beijing YanDong and Jiangsu Yike into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing YanDong MicroElectronic and Jiangsu Yike Food, you can compare the effects of market volatilities on Beijing YanDong and Jiangsu Yike 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 Beijing YanDong with a short position of Jiangsu Yike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing YanDong and Jiangsu Yike.

Diversification Opportunities for Beijing YanDong and Jiangsu Yike

0.24

Correlation Coefficient

Beijing YanDong  Jiangsu Yike

Modest diversification

The 3 months correlation between Beijing and Jiangsu is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Beijing YanDong MicroElectroni and Jiangsu Yike Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yike Food and Beijing YanDong 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 Beijing YanDong MicroElectronic are associated (or correlated) with Jiangsu Yike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yike Food has no effect on the direction of Beijing YanDong i.e., Beijing YanDong and Jiangsu Yike go up and down completely randomly.

Pair Corralation between Beijing YanDong and Jiangsu Yike

Assuming the 90 days trading horizon Beijing YanDong MicroElectronic is expected to under-perform the Jiangsu Yike. But the stock apears to be less risky and, when comparing its historical volatility, Beijing YanDong MicroElectronic is 1.82 times less risky than Jiangsu Yike. The stock trades about -0.31 of its potential returns per unit of risk. The Jiangsu Yike Food is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,386  in Jiangsu Yike Food on October 8, 2024 and sell it today you would lose (227.00) from holding Jiangsu Yike Food or give up 16.38% of portfolio value over 90 days.

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

Beijing YanDong MicroElectroni  vs.  Jiangsu Yike Food

Beijing YanDong Micr

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangsu Yike Food

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Beijing YanDong and Jiangsu Yike

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

The idea behind Beijing YanDong MicroElectronic and Jiangsu Yike Food 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.