Correlation Between Dazhong Transportation and Yindu Kitchen

Can any of the company-specific risk be diversified away by investing in both Dazhong Transportation and Yindu Kitchen 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 Dazhong Transportation and Yindu Kitchen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dazhong Transportation Group and Yindu Kitchen Equipment, you can compare the effects of market volatilities on Dazhong Transportation and Yindu Kitchen 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 Dazhong Transportation with a short position of Yindu Kitchen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Yindu Kitchen.

Diversification Opportunities for Dazhong Transportation and Yindu Kitchen

-0.25

Correlation Coefficient

Dazhong Transportation  Yindu Kitchen

Very good diversification

The 3 months correlation between Dazhong and Yindu is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Yindu Kitchen Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yindu Kitchen Equipment and Dazhong Transportation 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 Dazhong Transportation Group are associated (or correlated) with Yindu Kitchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yindu Kitchen Equipment has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Yindu Kitchen go up and down completely randomly.

Pair Corralation between Dazhong Transportation and Yindu Kitchen

Assuming the 90 days trading horizon Dazhong Transportation is expected to generate 4.02 times less return on investment than Yindu Kitchen. In addition to that, Dazhong Transportation is 1.27 times more volatile than Yindu Kitchen Equipment. It trades about 0.01 of its total potential returns per unit of risk. Yindu Kitchen Equipment is currently generating about 0.05 per unit of volatility. If you would invest  1,618  in Yindu Kitchen Equipment on September 26, 2024 and sell it today you would earn a total of  817.00  from holding Yindu Kitchen Equipment or generate 50.49% return on investment over 90 days.

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

Dazhong Transportation Group  vs.  Yindu Kitchen Equipment

Dazhong Transportation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dazhong Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Yindu Kitchen Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dazhong Transportation and Yindu Kitchen

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

The idea behind Dazhong Transportation Group and Yindu Kitchen Equipment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.