Correlation Between Yuan High and Celxpert Energy

Can any of the company-specific risk be diversified away by investing in both Yuan High and Celxpert Energy 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 Yuan High and Celxpert Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuan High Tech Development and Celxpert Energy, you can compare the effects of market volatilities on Yuan High and Celxpert Energy 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 Yuan High with a short position of Celxpert Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan High and Celxpert Energy.

Diversification Opportunities for Yuan High and Celxpert Energy

-0.64

Correlation Coefficient

Yuan High  Celxpert Energy

Excellent diversification

The 3 months correlation between Yuan and Celxpert is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Yuan High Tech Development and Celxpert Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celxpert Energy and Yuan High 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 Yuan High Tech Development are associated (or correlated) with Celxpert Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celxpert Energy has no effect on the direction of Yuan High i.e., Yuan High and Celxpert Energy go up and down completely randomly.

Pair Corralation between Yuan High and Celxpert Energy

Assuming the 90 days trading horizon Yuan High Tech Development is expected to under-perform the Celxpert Energy. But the stock apears to be less risky and, when comparing its historical volatility, Yuan High Tech Development is 1.94 times less risky than Celxpert Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Celxpert Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,445  in Celxpert Energy on September 14, 2024 and sell it today you would earn a total of  1,045  from holding Celxpert Energy or generate 42.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Yuan High Tech Development  vs.  Celxpert Energy

Yuan High Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuan High Tech Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yuan High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Celxpert Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Celxpert Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Celxpert Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuan High and Celxpert Energy

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

The idea behind Yuan High Tech Development and Celxpert Energy 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.