Correlation Between Aba Chemicals and Yili Chuanning

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Can any of the company-specific risk be diversified away by investing in both Aba Chemicals and Yili Chuanning 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 Aba Chemicals and Yili Chuanning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aba Chemicals Corp and Yili Chuanning Biotechnology, you can compare the effects of market volatilities on Aba Chemicals and Yili Chuanning 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 Aba Chemicals with a short position of Yili Chuanning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and Yili Chuanning.

Diversification Opportunities for Aba Chemicals and Yili Chuanning

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Aba and Yili is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote and Aba Chemicals 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 Aba Chemicals Corp are associated (or correlated) with Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Yili Chuanning go up and down completely randomly.

Pair Corralation between Aba Chemicals and Yili Chuanning

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to under-perform the Yili Chuanning. In addition to that, Aba Chemicals is 1.17 times more volatile than Yili Chuanning Biotechnology. It trades about -0.01 of its total potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about 0.04 per unit of volatility. If you would invest  881.00  in Yili Chuanning Biotechnology on October 12, 2024 and sell it today you would earn a total of  265.00  from holding Yili Chuanning Biotechnology or generate 30.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Aba Chemicals Corp  vs.  Yili Chuanning Biotechnology

 Performance 
       Timeline  
Aba Chemicals Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Aba Chemicals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Aba Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Yili Chuanning Biote 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Yili Chuanning Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yili Chuanning is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aba Chemicals and Yili Chuanning Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aba Chemicals and Yili Chuanning

The main advantage of trading using opposite Aba Chemicals and Yili Chuanning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aba Chemicals position performs unexpectedly, Yili Chuanning 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 Yili Chuanning will offset losses from the drop in Yili Chuanning's long position.
The idea behind Aba Chemicals Corp and Yili Chuanning Biotechnology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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