Correlation Between Shandong and Hubeiyichang Transportation

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

By analyzing existing cross correlation between Shandong Hi Speed RoadBridge and Hubeiyichang Transportation Group, you can compare the effects of market volatilities on Shandong and Hubeiyichang Transportation 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 Shandong with a short position of Hubeiyichang Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong and Hubeiyichang Transportation.

Diversification Opportunities for Shandong and Hubeiyichang Transportation

0.82

Correlation Coefficient

Shandong  Hubeiyichang Transportation

Very poor diversification

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

Pair Corralation between Shandong and Hubeiyichang Transportation

Assuming the 90 days trading horizon Shandong Hi Speed RoadBridge is expected to under-perform the Hubeiyichang Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Hi Speed RoadBridge is 1.29 times less risky than Hubeiyichang Transportation. The stock trades about -0.11 of its potential returns per unit of risk. The Hubeiyichang Transportation Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  536.00  in Hubeiyichang Transportation Group on November 29, 2024 and sell it today you would lose (41.00) from holding Hubeiyichang Transportation Group or give up 7.65% of portfolio value over 90 days.

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

Shandong Hi Speed RoadBridge  vs.  Hubeiyichang Transportation Gr

Shandong Hi Speed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Hi Speed RoadBridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hubeiyichang Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hubeiyichang Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong and Hubeiyichang Transportation

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

The idea behind Shandong Hi Speed RoadBridge and Hubeiyichang Transportation 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.