Correlation Between Yirendai and Opera

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

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

Diversification Opportunities for Yirendai and Opera

-0.24

Correlation Coefficient

Yirendai  Opera

Very good diversification

The 3 months correlation between Yirendai and Opera is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Yirendai and Opera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opera and Yirendai 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 Yirendai are associated (or correlated) with Opera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opera has no effect on the direction of Yirendai i.e., Yirendai and Opera go up and down completely randomly.

Pair Corralation between Yirendai and Opera

Considering the 90-day investment horizon Yirendai is expected to generate 1.52 times less return on investment than Opera. In addition to that, Yirendai is 2.56 times more volatile than Opera. It trades about 0.04 of its total potential returns per unit of risk. Opera is currently generating about 0.18 per unit of volatility. If you would invest  1,480  in Opera on September 17, 2024 and sell it today you would earn a total of  459.00  from holding Opera or generate 31.01% return on investment over 90 days.

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

Yirendai  vs.  Opera

Yirendai

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yirendai are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Yirendai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Opera

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Opera are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Opera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yirendai and Opera

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

The idea behind Yirendai and Opera 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.