Correlation Between China Yuchai and Leisure Fund

Can any of the company-specific risk be diversified away by investing in both China Yuchai and Leisure Fund 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 Leisure Fund 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 Leisure Fund Class, you can compare the effects of market volatilities on China Yuchai and Leisure Fund 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 Leisure Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Yuchai and Leisure Fund.

Diversification Opportunities for China Yuchai and Leisure Fund

0.05

Correlation Coefficient

China Yuchai  Leisure Fund

Significant diversification

The 3 months correlation between China and Leisure is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Leisure Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Class 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 Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Class has no effect on the direction of China Yuchai i.e., China Yuchai and Leisure Fund go up and down completely randomly.

Pair Corralation between China Yuchai and Leisure Fund

Considering the 90-day investment horizon China Yuchai International is expected to generate 7.22 times more return on investment than Leisure Fund. However, China Yuchai is 7.22 times more volatile than Leisure Fund Class. It trades about 0.2 of its potential returns per unit of risk. Leisure Fund Class is currently generating about -0.02 per unit of risk. If you would invest  926.00  in China Yuchai International on December 21, 2024 and sell it today you would earn a total of  987.00  from holding China Yuchai International or generate 106.59% return on investment over 90 days.

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

China Yuchai International  vs.  Leisure Fund Class

China Yuchai Interna

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Yuchai International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, China Yuchai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Leisure Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leisure Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leisure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Yuchai and Leisure Fund

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

The idea behind China Yuchai International and Leisure Fund Class 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.