Correlation Between Yonyou Auto and Shaanxi Broadcast

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

By analyzing existing cross correlation between Yonyou Auto Information and Shaanxi Broadcast TV, you can compare the effects of market volatilities on Yonyou Auto and Shaanxi Broadcast 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 Yonyou Auto with a short position of Shaanxi Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yonyou Auto and Shaanxi Broadcast.

Diversification Opportunities for Yonyou Auto and Shaanxi Broadcast

0.81

Correlation Coefficient

Yonyou Auto  Shaanxi Broadcast

Very poor diversification

The 3 months correlation between Yonyou and Shaanxi is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Yonyou Auto Information and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast and Yonyou Auto 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 Yonyou Auto Information are associated (or correlated) with Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Yonyou Auto i.e., Yonyou Auto and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Yonyou Auto and Shaanxi Broadcast

Assuming the 90 days trading horizon Yonyou Auto Information is expected to under-perform the Shaanxi Broadcast. But the stock apears to be less risky and, when comparing its historical volatility, Yonyou Auto Information is 1.38 times less risky than Shaanxi Broadcast. The stock trades about -0.08 of its potential returns per unit of risk. The Shaanxi Broadcast TV is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Shaanxi Broadcast TV on September 25, 2024 and sell it today you would earn a total of  13.00  from holding Shaanxi Broadcast TV or generate 4.87% return on investment over 90 days.

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

Yonyou Auto Information  vs.  Shaanxi Broadcast TV

Yonyou Auto Information

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yonyou Auto Information are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yonyou Auto sustained solid returns over the last few months and may actually be approaching a breakup point.

Shaanxi Broadcast

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yonyou Auto and Shaanxi Broadcast

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

The idea behind Yonyou Auto Information and Shaanxi Broadcast TV 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.