Correlation Between WuXi AppTec and Yunnan Chihong

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

By analyzing existing cross correlation between WuXi AppTec Co and Yunnan Chihong ZincGermanium, you can compare the effects of market volatilities on WuXi AppTec and Yunnan Chihong 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 WuXi AppTec with a short position of Yunnan Chihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of WuXi AppTec and Yunnan Chihong.

Diversification Opportunities for WuXi AppTec and Yunnan Chihong

0.81

Correlation Coefficient

WuXi AppTec  Yunnan Chihong

Very poor diversification

The 3 months correlation between WuXi and Yunnan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WuXi AppTec Co and Yunnan Chihong ZincGermanium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chihong ZincG and WuXi AppTec 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 WuXi AppTec Co are associated (or correlated) with Yunnan Chihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chihong ZincG has no effect on the direction of WuXi AppTec i.e., WuXi AppTec and Yunnan Chihong go up and down completely randomly.

Pair Corralation between WuXi AppTec and Yunnan Chihong

Assuming the 90 days trading horizon WuXi AppTec Co is expected to generate 1.3 times more return on investment than Yunnan Chihong. However, WuXi AppTec is 1.3 times more volatile than Yunnan Chihong ZincGermanium. It trades about 0.1 of its potential returns per unit of risk. Yunnan Chihong ZincGermanium is currently generating about 0.06 per unit of risk. If you would invest  4,760  in WuXi AppTec Co on September 27, 2024 and sell it today you would earn a total of  804.00  from holding WuXi AppTec Co or generate 16.89% return on investment over 90 days.

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

WuXi AppTec Co  vs.  Yunnan Chihong ZincGermanium

WuXi AppTec

Risk-Adjusted Performance

7 of 100

Good

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

Yunnan Chihong ZincG

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Chihong ZincGermanium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Chihong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WuXi AppTec and Yunnan Chihong

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

The idea behind WuXi AppTec Co and Yunnan Chihong ZincGermanium 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.