Correlation Between Tongling Nonferrous and Heilongjiang Transport

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

By analyzing existing cross correlation between Tongling Nonferrous Metals and Heilongjiang Transport Development, you can compare the effects of market volatilities on Tongling Nonferrous and Heilongjiang Transport 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 Tongling Nonferrous with a short position of Heilongjiang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongling Nonferrous and Heilongjiang Transport.

Diversification Opportunities for Tongling Nonferrous and Heilongjiang Transport

0.59

Correlation Coefficient

Tongling Nonferrous  Heilongjiang Transport

Very weak diversification

The 3 months correlation between Tongling and Heilongjiang is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tongling Nonferrous Metals and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport and Tongling Nonferrous 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 Tongling Nonferrous Metals are associated (or correlated) with Heilongjiang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Transport has no effect on the direction of Tongling Nonferrous i.e., Tongling Nonferrous and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Tongling Nonferrous and Heilongjiang Transport

Assuming the 90 days trading horizon Tongling Nonferrous Metals is expected to under-perform the Heilongjiang Transport. But the stock apears to be less risky and, when comparing its historical volatility, Tongling Nonferrous Metals is 1.62 times less risky than Heilongjiang Transport. The stock trades about -0.02 of its potential returns per unit of risk. The Heilongjiang Transport Development is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  369.00  in Heilongjiang Transport Development on September 20, 2024 and sell it today you would earn a total of  23.00  from holding Heilongjiang Transport Development or generate 6.23% return on investment over 90 days.

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

Tongling Nonferrous Metals  vs.  Heilongjiang Transport Develop

Tongling Nonferrous

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tongling Nonferrous Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongling Nonferrous may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Heilongjiang Transport

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heilongjiang Transport sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongling Nonferrous and Heilongjiang Transport

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

The idea behind Tongling Nonferrous Metals and Heilongjiang Transport Development 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.