Correlation Between Hubeiyichang Transportation and Central China

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

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

Diversification Opportunities for Hubeiyichang Transportation and Central China

0.46

Correlation Coefficient

Hubeiyichang Transportation  Central China

Very weak diversification

The 3 months correlation between Hubeiyichang and Central is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Central China Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central China Land and Hubeiyichang Transportation 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 Hubeiyichang Transportation Group are associated (or correlated) with Central China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central China Land has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Central China go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Central China

Assuming the 90 days trading horizon Hubeiyichang Transportation Group is expected to generate 1.06 times more return on investment than Central China. However, Hubeiyichang Transportation is 1.06 times more volatile than Central China Land. It trades about 0.06 of its potential returns per unit of risk. Central China Land is currently generating about -0.03 per unit of risk. If you would invest  509.00  in Hubeiyichang Transportation Group on December 28, 2024 and sell it today you would earn a total of  20.00  from holding Hubeiyichang Transportation Group or generate 3.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Hubeiyichang Transportation Gr  vs.  Central China Land

Hubeiyichang Transportation

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hubeiyichang Transportation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Central China Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central China Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hubeiyichang Transportation and Central China

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

The idea behind Hubeiyichang Transportation Group and Central China Land 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.