Correlation Between Yingde Greatchem and Zoy Home

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Zoy Home 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 Zoy Home 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 Zoy Home Furnishing, you can compare the effects of market volatilities on Yingde Greatchem and Zoy Home 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 Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Zoy Home.

Diversification Opportunities for Yingde Greatchem and Zoy Home

0.92

Correlation Coefficient

Yingde Greatchem  Zoy Home

Almost no diversification

The 3 months correlation between Yingde and Zoy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing 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 Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Zoy Home go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Zoy Home

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to generate 0.78 times more return on investment than Zoy Home. However, Yingde Greatchem Chemicals is 1.28 times less risky than Zoy Home. It trades about -0.01 of its potential returns per unit of risk. Zoy Home Furnishing is currently generating about -0.02 per unit of risk. If you would invest  3,000  in Yingde Greatchem Chemicals on September 20, 2024 and sell it today you would lose (536.00) from holding Yingde Greatchem Chemicals or give up 17.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Yingde Greatchem Chemicals  vs.  Zoy Home Furnishing

Yingde Greatchem Che

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yingde Greatchem sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoy Home Furnishing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yingde Greatchem and Zoy Home

The main advantage of trading using opposite Yingde Greatchem and Zoy Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yingde Greatchem position performs unexpectedly, Zoy Home 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 Zoy Home will offset losses from the drop in Zoy Home's long position.

The idea behind Yingde Greatchem Chemicals and Zoy Home Furnishing 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.