Correlation Between CIMC Vehicles and Sichuan Yahua

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

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

Diversification Opportunities for CIMC Vehicles and Sichuan Yahua

0.55

Correlation Coefficient

CIMC Vehicles  Sichuan Yahua

Very weak diversification

The 3 months correlation between CIMC and Sichuan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CIMC Vehicles Co and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and CIMC Vehicles 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 CIMC Vehicles Co are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of CIMC Vehicles i.e., CIMC Vehicles and Sichuan Yahua go up and down completely randomly.

Pair Corralation between CIMC Vehicles and Sichuan Yahua

Assuming the 90 days trading horizon CIMC Vehicles Co is expected to generate 1.12 times more return on investment than Sichuan Yahua. However, CIMC Vehicles is 1.12 times more volatile than Sichuan Yahua Industrial. It trades about 0.03 of its potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about -0.04 per unit of risk. If you would invest  768.00  in CIMC Vehicles Co on September 23, 2024 and sell it today you would earn a total of  172.00  from holding CIMC Vehicles Co or generate 22.4% return on investment over 90 days.

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

CIMC Vehicles Co  vs.  Sichuan Yahua Industrial

CIMC Vehicles

Risk-Adjusted Performance

3 of 100

Insignificant

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

Sichuan Yahua Industrial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 17 (%) 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.

Pair Trading with CIMC Vehicles and Sichuan Yahua

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

The idea behind CIMC Vehicles Co and Sichuan Yahua Industrial 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.