Correlation Between China Yuchai and Helios Technologies

Can any of the company-specific risk be diversified away by investing in both China Yuchai and Helios Technologies 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 China Yuchai and Helios Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Yuchai International and Helios Technologies, you can compare the effects of market volatilities on China Yuchai and Helios Technologies 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 China Yuchai with a short position of Helios Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Yuchai and Helios Technologies.

Diversification Opportunities for China Yuchai and Helios Technologies

0.07

Correlation Coefficient

China Yuchai  Helios Technologies

Significant diversification

The 3 months correlation between China and Helios is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Helios Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Technologies and China Yuchai 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 China Yuchai International are associated (or correlated) with Helios Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Technologies has no effect on the direction of China Yuchai i.e., China Yuchai and Helios Technologies go up and down completely randomly.

Pair Corralation between China Yuchai and Helios Technologies

Considering the 90-day investment horizon China Yuchai International is expected to under-perform the Helios Technologies. But the stock apears to be less risky and, when comparing its historical volatility, China Yuchai International is 1.24 times less risky than Helios Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Helios Technologies is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,255  in Helios Technologies on August 14, 2024 and sell it today you would earn a total of  971.00  from holding Helios Technologies or generate 22.82% return on investment over 90 days.

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

China Yuchai International  vs.  Helios Technologies

China Yuchai Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Yuchai International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, China Yuchai is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Helios Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Helios Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Yuchai and Helios Technologies

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

The idea behind China Yuchai International and Helios Technologies 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.