Correlation Between China Yuchai and Thermon Group

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

Diversification Opportunities for China Yuchai and Thermon Group

0.27

Correlation Coefficient

China Yuchai  Thermon Group

Modest diversification

The 3 months correlation between China and Thermon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Thermon Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermon Group Holdings 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 Thermon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermon Group Holdings has no effect on the direction of China Yuchai i.e., China Yuchai and Thermon Group go up and down completely randomly.

Pair Corralation between China Yuchai and Thermon Group

Considering the 90-day investment horizon China Yuchai International is expected to generate 3.56 times more return on investment than Thermon Group. However, China Yuchai is 3.56 times more volatile than Thermon Group Holdings. It trades about 0.15 of its potential returns per unit of risk. Thermon Group Holdings is currently generating about 0.02 per unit of risk. If you would invest  1,107  in China Yuchai International on December 27, 2024 and sell it today you would earn a total of  708.00  from holding China Yuchai International or generate 63.96% return on investment over 90 days.

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

China Yuchai International  vs.  Thermon Group Holdings

China Yuchai Interna

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Yuchai International are ranked lower than 11 (%) 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.

Thermon Group Holdings

Risk-Adjusted Performance

Weak

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

Pair Trading with China Yuchai and Thermon Group

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

The idea behind China Yuchai International and Thermon Group Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.