Correlation Between Lepu Medical and Yingde Greatchem

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

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

Diversification Opportunities for Lepu Medical and Yingde Greatchem

0.82

Correlation Coefficient

Lepu Medical  Yingde Greatchem

Very poor diversification

The 3 months correlation between Lepu and Yingde is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lepu Medical Tech and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che and Lepu Medical 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 Lepu Medical Tech are associated (or correlated) with Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Lepu Medical i.e., Lepu Medical and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Lepu Medical and Yingde Greatchem

Assuming the 90 days trading horizon Lepu Medical Tech is expected to under-perform the Yingde Greatchem. But the stock apears to be less risky and, when comparing its historical volatility, Lepu Medical Tech is 1.21 times less risky than Yingde Greatchem. The stock trades about -0.04 of its potential returns per unit of risk. The Yingde Greatchem Chemicals is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,850  in Yingde Greatchem Chemicals on September 27, 2024 and sell it today you would lose (1,572) from holding Yingde Greatchem Chemicals or give up 40.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	79.39%
Values	Daily Returns

Lepu Medical Tech  vs.  Yingde Greatchem Chemicals

Lepu Medical Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepu Medical Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lepu Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yingde Greatchem Che

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yingde Greatchem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lepu Medical and Yingde Greatchem

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

The idea behind Lepu Medical Tech and Yingde Greatchem Chemicals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.