Correlation Between Hotai and Yulon Nissan
Can any of the company-specific risk be diversified away by investing in both Hotai and Yulon Nissan 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 Hotai and Yulon Nissan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotai Motor Co and Yulon Nissan Motor, you can compare the effects of market volatilities on Hotai and Yulon Nissan 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 Hotai with a short position of Yulon Nissan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and Yulon Nissan.
Diversification Opportunities for Hotai and Yulon Nissan
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hotai and Yulon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and Yulon Nissan Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Nissan Motor and Hotai 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 Hotai Motor Co are associated (or correlated) with Yulon Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Nissan Motor has no effect on the direction of Hotai i.e., Hotai and Yulon Nissan go up and down completely randomly.
Pair Corralation between Hotai and Yulon Nissan
Assuming the 90 days trading horizon Hotai Motor Co is expected to generate 0.74 times more return on investment than Yulon Nissan. However, Hotai Motor Co is 1.35 times less risky than Yulon Nissan. It trades about 0.0 of its potential returns per unit of risk. Yulon Nissan Motor is currently generating about -0.21 per unit of risk. If you would invest 61,800 in Hotai Motor Co on November 3, 2024 and sell it today you would lose (700.00) from holding Hotai Motor Co or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotai Motor Co vs. Yulon Nissan Motor
Performance |
| Timeline |
| Hotai Motor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Yulon Nissan Motor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hotai and Yulon Nissan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotai and Yulon Nissan
The main advantage of trading using opposite Hotai and Yulon Nissan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotai position performs unexpectedly, Yulon Nissan 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 Yulon Nissan will offset losses from the drop in Yulon Nissan's long position.The idea behind Hotai Motor Co and Yulon Nissan Motor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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