Correlation Between China Yuchai and LiveWire

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

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

Diversification Opportunities for China Yuchai and LiveWire

-0.14

Correlation Coefficient

China Yuchai  LiveWire

Good diversification

The 3 months correlation between China and LiveWire is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and LiveWire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveWire Group and China Yuchai 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 Yuchai International are associated (or correlated) with LiveWire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveWire Group has no effect on the direction of China Yuchai i.e., China Yuchai and LiveWire go up and down completely randomly.

Pair Corralation between China Yuchai and LiveWire

Considering the 90-day investment horizon China Yuchai International is expected to under-perform the LiveWire. But the stock apears to be less risky and, when comparing its historical volatility, China Yuchai International is 2.24 times less risky than LiveWire. The stock trades about -0.14 of its potential returns per unit of risk. The LiveWire Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  604.00  in LiveWire Group on September 3, 2024 and sell it today you would lose (4.00) from holding LiveWire Group or give up 0.66% of portfolio value over 90 days.

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

China Yuchai International  vs.  LiveWire Group

China Yuchai Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Yuchai International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

LiveWire Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LiveWire Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, LiveWire is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with China Yuchai and LiveWire

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

The idea behind China Yuchai International and LiveWire Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.