Correlation Between Sichuan Yahua and Eastroc Beverage

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

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

Diversification Opportunities for Sichuan Yahua and Eastroc Beverage

0.78

Correlation Coefficient

Sichuan Yahua  Eastroc Beverage

Poor diversification

The 3 months correlation between Sichuan and Eastroc is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage and Sichuan Yahua 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 Sichuan Yahua Industrial are associated (or correlated) with Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Eastroc Beverage

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to under-perform the Eastroc Beverage. In addition to that, Sichuan Yahua is 1.26 times more volatile than Eastroc Beverage Group. It trades about -0.04 of its total potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.08 per unit of volatility. If you would invest  12,997  in Eastroc Beverage Group on September 28, 2024 and sell it today you would earn a total of  11,166  from holding Eastroc Beverage Group or generate 85.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Sichuan Yahua Industrial  vs.  Eastroc Beverage Group

Sichuan Yahua Industrial

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Yahua and Eastroc Beverage

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

The idea behind Sichuan Yahua Industrial and Eastroc Beverage Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.