Correlation Between Yao Sheng and Chong Hong

Can any of the company-specific risk be diversified away by investing in both Yao Sheng and Chong Hong 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 Yao Sheng and Chong Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yao Sheng Electronic and Chong Hong Construction, you can compare the effects of market volatilities on Yao Sheng and Chong Hong 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 Yao Sheng with a short position of Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yao Sheng and Chong Hong.

Diversification Opportunities for Yao Sheng and Chong Hong

0.81

Correlation Coefficient

Yao Sheng  Chong Hong

Very poor diversification

The 3 months correlation between Yao and Chong is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Yao Sheng Electronic and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction and Yao Sheng 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 Yao Sheng Electronic are associated (or correlated) with Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Yao Sheng i.e., Yao Sheng and Chong Hong go up and down completely randomly.

Pair Corralation between Yao Sheng and Chong Hong

Assuming the 90 days trading horizon Yao Sheng is expected to generate 1.77 times less return on investment than Chong Hong. In addition to that, Yao Sheng is 1.26 times more volatile than Chong Hong Construction. It trades about 0.26 of its total potential returns per unit of risk. Chong Hong Construction is currently generating about 0.59 per unit of volatility. If you would invest  8,970  in Chong Hong Construction on January 31, 2024 and sell it today you would earn a total of  3,830  from holding Chong Hong Construction or generate 42.7% return on investment over 90 days.

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

Yao Sheng Electronic  vs.  Chong Hong Construction

Yao Sheng Electronic

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yao Sheng Electronic are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Yao Sheng showed solid returns over the last few months and may actually be approaching a breakup point.

Chong Hong Construction

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Chong Hong Construction are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chong Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yao Sheng and Chong Hong

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

The idea behind Yao Sheng Electronic and Chong Hong Construction 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.