Correlation Between Hunan TV and Gansu Yasheng

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

By analyzing existing cross correlation between Hunan TV Broadcast and Gansu Yasheng Industrial, you can compare the effects of market volatilities on Hunan TV and Gansu Yasheng 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 Hunan TV with a short position of Gansu Yasheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Gansu Yasheng.

Diversification Opportunities for Hunan TV and Gansu Yasheng

0.74

Correlation Coefficient

Hunan TV  Gansu Yasheng

Poor diversification

The 3 months correlation between Hunan and Gansu is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Gansu Yasheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Yasheng Industrial and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Gansu Yasheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Yasheng Industrial has no effect on the direction of Hunan TV i.e., Hunan TV and Gansu Yasheng go up and down completely randomly.

Pair Corralation between Hunan TV and Gansu Yasheng

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to generate 1.79 times more return on investment than Gansu Yasheng. However, Hunan TV is 1.79 times more volatile than Gansu Yasheng Industrial. It trades about 0.07 of its potential returns per unit of risk. Gansu Yasheng Industrial is currently generating about 0.06 per unit of risk. If you would invest  638.00  in Hunan TV Broadcast on September 30, 2024 and sell it today you would earn a total of  100.00  from holding Hunan TV Broadcast or generate 15.67% return on investment over 90 days.

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

Hunan TV Broadcast  vs.  Gansu Yasheng Industrial

Hunan TV Broadcast

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Yasheng Industrial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Yasheng Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Yasheng may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hunan TV and Gansu Yasheng

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

The idea behind Hunan TV Broadcast and Gansu Yasheng Industrial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.