Correlation Between China Gold and Yerbae Brands

Can any of the company-specific risk be diversified away by investing in both China Gold and Yerbae Brands 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 China Gold and Yerbae Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Gold International and Yerbae Brands Corp, you can compare the effects of market volatilities on China Gold and Yerbae Brands 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 China Gold with a short position of Yerbae Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gold and Yerbae Brands.

Diversification Opportunities for China Gold and Yerbae Brands

-0.51

Correlation Coefficient

China Gold  Yerbae Brands

Excellent diversification

The 3 months correlation between China and Yerbae is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and Yerbae Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yerbae Brands Corp and China Gold 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 China Gold International are associated (or correlated) with Yerbae Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yerbae Brands Corp has no effect on the direction of China Gold i.e., China Gold and Yerbae Brands go up and down completely randomly.

Pair Corralation between China Gold and Yerbae Brands

Assuming the 90 days trading horizon China Gold International is expected to under-perform the Yerbae Brands. But the stock apears to be less risky and, when comparing its historical volatility, China Gold International is 4.7 times less risky than Yerbae Brands. The stock trades about -0.15 of its potential returns per unit of risk. The Yerbae Brands Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Yerbae Brands Corp on September 22, 2024 and sell it today you would lose (2.00) from holding Yerbae Brands Corp or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

China Gold International  vs.  Yerbae Brands Corp

China Gold International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, China Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Yerbae Brands Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yerbae Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Gold and Yerbae Brands

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

The idea behind China Gold International and Yerbae Brands Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..