Correlation Between Shenzhen United and Youyou Foods

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

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

Diversification Opportunities for Shenzhen United and Youyou Foods

-0.7

Correlation Coefficient

Shenzhen United  Youyou Foods

Excellent diversification

The 3 months correlation between Shenzhen and Youyou is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen United Winners and Youyou Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youyou Foods and Shenzhen United 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 Shenzhen United Winners 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 Shenzhen United i.e., Shenzhen United and Youyou Foods go up and down completely randomly.

Pair Corralation between Shenzhen United and Youyou Foods

Assuming the 90 days trading horizon Shenzhen United Winners is expected to generate 0.98 times more return on investment than Youyou Foods. However, Shenzhen United Winners is 1.02 times less risky than Youyou Foods. It trades about 0.01 of its potential returns per unit of risk. Youyou Foods Co is currently generating about 0.01 per unit of risk. If you would invest  1,623  in Shenzhen United Winners on December 25, 2024 and sell it today you would lose (5.00) from holding Shenzhen United Winners or give up 0.31% of portfolio value over 90 days.

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

Shenzhen United Winners  vs.  Youyou Foods Co

Shenzhen United Winners

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Shenzhen United and Youyou Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen United 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 Shenzhen United Winners 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..