Correlation Between CIMC Vehicles and Zhejiang Yayi

Can any of the company-specific risk be diversified away by investing in both CIMC Vehicles and Zhejiang Yayi 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 Zhejiang Yayi 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 Zhejiang Yayi Metal, you can compare the effects of market volatilities on CIMC Vehicles and Zhejiang Yayi 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 Zhejiang Yayi. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIMC Vehicles and Zhejiang Yayi.

Diversification Opportunities for CIMC Vehicles and Zhejiang Yayi

0.7

Correlation Coefficient

CIMC Vehicles  Zhejiang Yayi

Poor diversification

The 3 months correlation between CIMC and Zhejiang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CIMC Vehicles Co and Zhejiang Yayi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Yayi Metal 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 Zhejiang Yayi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Yayi Metal has no effect on the direction of CIMC Vehicles i.e., CIMC Vehicles and Zhejiang Yayi go up and down completely randomly.

Pair Corralation between CIMC Vehicles and Zhejiang Yayi

Assuming the 90 days trading horizon CIMC Vehicles is expected to generate 4.49 times less return on investment than Zhejiang Yayi. But when comparing it to its historical volatility, CIMC Vehicles Co is 1.28 times less risky than Zhejiang Yayi. It trades about 0.05 of its potential returns per unit of risk. Zhejiang Yayi Metal is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Zhejiang Yayi Metal on September 23, 2024 and sell it today you would earn a total of  812.00  from holding Zhejiang Yayi Metal or generate 44.25% return on investment over 90 days.

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

CIMC Vehicles Co  vs.  Zhejiang Yayi Metal

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.

Zhejiang Yayi Metal

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yayi Metal are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yayi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIMC Vehicles and Zhejiang Yayi

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

The idea behind CIMC Vehicles Co and Zhejiang Yayi Metal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.