Correlation Between Freedom Holding and Yuexiu Transport

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

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

Diversification Opportunities for Freedom Holding and Yuexiu Transport

0.8

Correlation Coefficient

Freedom Holding  Yuexiu Transport

Very poor diversification

The 3 months correlation between Freedom and Yuexiu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Holding Corp 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 Freedom Holding 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 Freedom Holding Corp 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 Freedom Holding i.e., Freedom Holding and Yuexiu Transport go up and down completely randomly.

Pair Corralation between Freedom Holding and Yuexiu Transport

Given the investment horizon of 90 days Freedom Holding is expected to generate 1.53 times less return on investment than Yuexiu Transport. But when comparing it to its historical volatility, Freedom Holding Corp is 1.19 times less risky than Yuexiu Transport. It trades about 0.07 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Yuexiu Transport Infrastructure on October 10, 2024 and sell it today you would earn a total of  40.00  from holding Yuexiu Transport Infrastructure or generate 222.22% return on investment over 90 days.

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

Freedom Holding Corp  vs.  Yuexiu Transport Infrastructur

Freedom Holding Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Yuexiu Transport Inf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freedom Holding and Yuexiu Transport

The main advantage of trading using opposite Freedom Holding and Yuexiu Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Holding 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 Freedom Holding Corp 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.