Correlation Between Ye Chiu and Nanhua Bio

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

Diversification Opportunities for Ye Chiu and Nanhua Bio

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between 601388 and Nanhua is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ye Chiu Metal and Nanhua Bio Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanhua Bio Medicine and Ye Chiu 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 Ye Chiu Metal are associated (or correlated) with Nanhua Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanhua Bio Medicine has no effect on the direction of Ye Chiu i.e., Ye Chiu and Nanhua Bio go up and down completely randomly.

Pair Corralation between Ye Chiu and Nanhua Bio

Assuming the 90 days trading horizon Ye Chiu Metal is expected to generate 0.89 times more return on investment than Nanhua Bio. However, Ye Chiu Metal is 1.12 times less risky than Nanhua Bio. It trades about -0.37 of its potential returns per unit of risk. Nanhua Bio Medicine is currently generating about -0.56 per unit of risk. If you would invest  289.00  in Ye Chiu Metal on October 9, 2024 and sell it today you would lose (49.00) from holding Ye Chiu Metal or give up 16.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ye Chiu Metal  vs.  Nanhua Bio Medicine

 Performance 
       Timeline  
Ye Chiu Metal 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Ye Chiu and Nanhua Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ye Chiu and Nanhua Bio

The main advantage of trading using opposite Ye Chiu and Nanhua Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ye Chiu position performs unexpectedly, Nanhua Bio 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 Nanhua Bio will offset losses from the drop in Nanhua Bio's long position.
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The idea behind Ye Chiu Metal and Nanhua Bio Medicine 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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