Correlation Between Smart For and YanGuFang International

Can any of the company-specific risk be diversified away by investing in both Smart For and YanGuFang International 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 Smart For and YanGuFang International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smart for Life and YanGuFang International Group, you can compare the effects of market volatilities on Smart For and YanGuFang International 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 Smart For with a short position of YanGuFang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart For and YanGuFang International.

Diversification Opportunities for Smart For and YanGuFang International

0.82

Correlation Coefficient

Smart For  YanGuFang International

Very poor diversification

The 3 months correlation between Smart and YanGuFang is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smart for Life and YanGuFang International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YanGuFang International and Smart For 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 Smart for Life are associated (or correlated) with YanGuFang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YanGuFang International has no effect on the direction of Smart For i.e., Smart For and YanGuFang International go up and down completely randomly.

Pair Corralation between Smart For and YanGuFang International

Given the investment horizon of 90 days Smart for Life is expected to generate 8.2 times more return on investment than YanGuFang International. However, Smart For is 8.2 times more volatile than YanGuFang International Group. It trades about 0.07 of its potential returns per unit of risk. YanGuFang International Group is currently generating about 0.3 per unit of risk. If you would invest  354.00  in Smart for Life on February 4, 2024 and sell it today you would earn a total of  4.00  from holding Smart for Life or generate 1.13% return on investment over 90 days.

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

Smart for Life  vs.  YanGuFang International Group

Smart for Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart for Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

YanGuFang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YanGuFang International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Smart For and YanGuFang International

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

The idea behind Smart for Life and YanGuFang International Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.