Correlation Between ASSOC BR and Yuexiu Transport

Can any of the company-specific risk be diversified away by investing in both ASSOC BR and Yuexiu Transport 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 ASSOC BR and Yuexiu Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASSOC BR FOODS and Yuexiu Transport Infrastructure, you can compare the effects of market volatilities on ASSOC BR and Yuexiu Transport 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 ASSOC BR with a short position of Yuexiu Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSOC BR and Yuexiu Transport.

Diversification Opportunities for ASSOC BR and Yuexiu Transport

0.38

Correlation Coefficient

ASSOC BR  Yuexiu Transport

Weak diversification

The 3 months correlation between ASSOC and Yuexiu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf and ASSOC BR 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 ASSOC BR FOODS are associated (or correlated) with Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of ASSOC BR i.e., ASSOC BR and Yuexiu Transport go up and down completely randomly.

Pair Corralation between ASSOC BR and Yuexiu Transport

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to generate 0.76 times more return on investment than Yuexiu Transport. However, ASSOC BR FOODS is 1.31 times less risky than Yuexiu Transport. It trades about -0.06 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about -0.06 per unit of risk. If you would invest  2,460  in ASSOC BR FOODS on December 26, 2024 and sell it today you would lose (160.00) from holding ASSOC BR FOODS or give up 6.5% of portfolio value over 90 days.

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

ASSOC BR FOODS  vs.  Yuexiu Transport Infrastructur

ASSOC BR FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASSOC BR FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASSOC BR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Yuexiu Transport Inf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yuexiu Transport Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ASSOC BR and Yuexiu Transport

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

The idea behind ASSOC BR FOODS and Yuexiu Transport Infrastructure 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.