Correlation Between Biwin Storage and YiDong Electronics

Can any of the company-specific risk be diversified away by investing in both Biwin Storage and YiDong Electronics 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 Biwin Storage and YiDong Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biwin Storage Technology and YiDong Electronics Technology, you can compare the effects of market volatilities on Biwin Storage and YiDong Electronics 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 Biwin Storage with a short position of YiDong Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biwin Storage and YiDong Electronics.

Diversification Opportunities for Biwin Storage and YiDong Electronics

0.36

Correlation Coefficient

Biwin Storage  YiDong Electronics

Weak diversification

The 3 months correlation between Biwin and YiDong is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Biwin Storage Technology and YiDong Electronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YiDong Electronics and Biwin Storage 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 Biwin Storage Technology are associated (or correlated) with YiDong Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YiDong Electronics has no effect on the direction of Biwin Storage i.e., Biwin Storage and YiDong Electronics go up and down completely randomly.

Pair Corralation between Biwin Storage and YiDong Electronics

Assuming the 90 days trading horizon Biwin Storage Technology is expected to generate 1.07 times more return on investment than YiDong Electronics. However, Biwin Storage is 1.07 times more volatile than YiDong Electronics Technology. It trades about 0.06 of its potential returns per unit of risk. YiDong Electronics Technology is currently generating about 0.03 per unit of risk. If you would invest  4,035  in Biwin Storage Technology on October 9, 2024 and sell it today you would earn a total of  1,825  from holding Biwin Storage Technology or generate 45.23% return on investment over 90 days.

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

Biwin Storage Technology  vs.  YiDong Electronics Technology

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biwin Storage Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

YiDong Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YiDong Electronics Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YiDong Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biwin Storage and YiDong Electronics

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

The idea behind Biwin Storage Technology and YiDong Electronics Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.