Correlation Between Yulon and Chun Yuan
Can any of the company-specific risk be diversified away by investing in both Yulon and Chun Yuan 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 Yulon and Chun Yuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yulon Motor Co and Chun Yuan Steel, you can compare the effects of market volatilities on Yulon and Chun Yuan 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 Yulon with a short position of Chun Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yulon and Chun Yuan.
Diversification Opportunities for Yulon and Chun Yuan
Poor diversification
The 3 months correlation between Yulon and Chun is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel and Yulon 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 Yulon Motor Co are associated (or correlated) with Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Yulon i.e., Yulon and Chun Yuan go up and down completely randomly.
Pair Corralation between Yulon and Chun Yuan
Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Chun Yuan. In addition to that, Yulon is 1.77 times more volatile than Chun Yuan Steel. It trades about -0.02 of its total potential returns per unit of risk. Chun Yuan Steel is currently generating about 0.0 per unit of volatility. If you would invest 1,860 in Chun Yuan Steel on August 29, 2024 and sell it today you would lose (5.00) from holding Chun Yuan Steel or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yulon Motor Co vs. Chun Yuan Steel
Performance |
| Timeline |
| Yulon Motor |
| Chun Yuan Steel |
Yulon and Chun Yuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yulon and Chun Yuan
The main advantage of trading using opposite Yulon and Chun Yuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon position performs unexpectedly, Chun Yuan 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 Chun Yuan will offset losses from the drop in Chun Yuan's long position.| Yulon vs. China Motor Corp | Yulon vs. China Steel Corp | Yulon vs. Nan Ya Plastics | Yulon vs. Chang Hwa Commercial |
| Chun Yuan vs. China Man Made Fiber | Chun Yuan vs. USI Corp | Chun Yuan vs. China Petrochemical Development | Chun Yuan vs. Yulon Motor Co |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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