Correlation Between Yingde Greatchem and Wuhan Hvsen

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

Diversification Opportunities for Yingde Greatchem and Wuhan Hvsen

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Yingde and Wuhan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Wuhan Hvsen Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Hvsen Biotechnology and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Wuhan Hvsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Hvsen Biotechnology has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Wuhan Hvsen go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Wuhan Hvsen

Assuming the 90 days trading horizon Yingde Greatchem is expected to generate 1.12 times less return on investment than Wuhan Hvsen. But when comparing it to its historical volatility, Yingde Greatchem Chemicals is 1.49 times less risky than Wuhan Hvsen. It trades about 0.28 of its potential returns per unit of risk. Wuhan Hvsen Biotechnology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  945.00  in Wuhan Hvsen Biotechnology on November 4, 2024 and sell it today you would earn a total of  92.00  from holding Wuhan Hvsen Biotechnology or generate 9.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Yingde Greatchem Chemicals  vs.  Wuhan Hvsen Biotechnology

 Performance 
       Timeline  
Yingde Greatchem Che 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Yingde Greatchem and Wuhan Hvsen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Yingde Greatchem and Wuhan Hvsen

The main advantage of trading using opposite Yingde Greatchem and Wuhan Hvsen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yingde Greatchem position performs unexpectedly, Wuhan Hvsen 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 Wuhan Hvsen will offset losses from the drop in Wuhan Hvsen's long position.
The idea behind Yingde Greatchem Chemicals and Wuhan Hvsen 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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