Correlation Between Yihai International and Strategic Investments

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

By analyzing existing cross correlation between Yihai International Holding and Strategic Investments AS, you can compare the effects of market volatilities on Yihai International and Strategic Investments 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 Yihai International with a short position of Strategic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yihai International and Strategic Investments.

Diversification Opportunities for Yihai International and Strategic Investments

-0.37

Correlation Coefficient

Yihai International  Strategic Investments

Very good diversification

The 3 months correlation between Yihai and Strategic is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Yihai International Holding and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments and Yihai International 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 Yihai International Holding are associated (or correlated) with Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of Yihai International i.e., Yihai International and Strategic Investments go up and down completely randomly.

Pair Corralation between Yihai International and Strategic Investments

Assuming the 90 days horizon Yihai International Holding is expected to generate 1.0 times more return on investment than Strategic Investments. However, Yihai International is 1.0 times more volatile than Strategic Investments AS. It trades about 0.04 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.04 per unit of risk. If you would invest  112.00  in Yihai International Holding on September 16, 2024 and sell it today you would earn a total of  84.00  from holding Yihai International Holding or generate 75.0% return on investment over 90 days.

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

Yihai International Holding  vs.  Strategic Investments AS

Yihai International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yihai International Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yihai International reported solid returns over the last few months and may actually be approaching a breakup point.

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Yihai International and Strategic Investments

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

The idea behind Yihai International Holding and Strategic Investments AS 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.