Correlation Between Yunnan Chuangxin and Huizhou Desay

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

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

Diversification Opportunities for Yunnan Chuangxin and Huizhou Desay

0.95

Correlation Coefficient

Yunnan Chuangxin  Huizhou Desay

Almost no diversification

The 3 months correlation between Yunnan and Huizhou is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Chuangxin New and Huizhou Desay SV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Desay SV and Yunnan Chuangxin 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 Yunnan Chuangxin New are associated (or correlated) with Huizhou Desay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Desay SV has no effect on the direction of Yunnan Chuangxin i.e., Yunnan Chuangxin and Huizhou Desay go up and down completely randomly.

Pair Corralation between Yunnan Chuangxin and Huizhou Desay

Assuming the 90 days trading horizon Yunnan Chuangxin New is expected to generate 0.96 times more return on investment than Huizhou Desay. However, Yunnan Chuangxin New is 1.04 times less risky than Huizhou Desay. It trades about -0.29 of its potential returns per unit of risk. Huizhou Desay SV is currently generating about -0.28 per unit of risk. If you would invest  3,883  in Yunnan Chuangxin New on September 23, 2024 and sell it today you would lose (506.00) from holding Yunnan Chuangxin New or give up 13.03% of portfolio value over 90 days.

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

Yunnan Chuangxin New  vs.  Huizhou Desay SV

Yunnan Chuangxin New

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Chuangxin New are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Chuangxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Huizhou Desay SV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huizhou Desay SV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huizhou Desay sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yunnan Chuangxin and Huizhou Desay

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

The idea behind Yunnan Chuangxin New and Huizhou Desay SV 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.