Correlation Between Chongqing Road and Yunnan Jianzhijia

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

Diversification Opportunities for Chongqing Road and Yunnan Jianzhijia

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chongqing and Yunnan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Road Bridge and Yunnan Jianzhijia Health Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Jianzhijia and Chongqing Road 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 Chongqing Road Bridge are associated (or correlated) with Yunnan Jianzhijia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Jianzhijia has no effect on the direction of Chongqing Road i.e., Chongqing Road and Yunnan Jianzhijia go up and down completely randomly.

Pair Corralation between Chongqing Road and Yunnan Jianzhijia

Assuming the 90 days trading horizon Chongqing Road Bridge is expected to generate 1.01 times more return on investment than Yunnan Jianzhijia. However, Chongqing Road is 1.01 times more volatile than Yunnan Jianzhijia Health Chain. It trades about 0.01 of its potential returns per unit of risk. Yunnan Jianzhijia Health Chain is currently generating about -0.03 per unit of risk. If you would invest  729.00  in Chongqing Road Bridge on September 12, 2024 and sell it today you would lose (6.00) from holding Chongqing Road Bridge or give up 0.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chongqing Road Bridge  vs.  Yunnan Jianzhijia Health Chain

 Performance 
       Timeline  
Chongqing Road Bridge 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Road Bridge are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Road sustained solid returns over the last few months and may actually be approaching a breakup point.
Yunnan Jianzhijia 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Jianzhijia Health Chain are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Jianzhijia sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Road and Yunnan Jianzhijia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chongqing Road and Yunnan Jianzhijia

The main advantage of trading using opposite Chongqing Road and Yunnan Jianzhijia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Road position performs unexpectedly, Yunnan Jianzhijia 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 Jianzhijia will offset losses from the drop in Yunnan Jianzhijia's long position.
The idea behind Chongqing Road Bridge and Yunnan Jianzhijia Health Chain 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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