Correlation Between Hubeiyichang Transportation and China Asset

Can any of the company-specific risk be diversified away by investing in both Hubeiyichang Transportation and China Asset 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 China Asset 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 China Asset Management, you can compare the effects of market volatilities on Hubeiyichang Transportation and China Asset 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 China Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubeiyichang Transportation and China Asset.

Diversification Opportunities for Hubeiyichang Transportation and China Asset

0.19

Correlation Coefficient

Hubeiyichang Transportation  China Asset

Average diversification

The 3 months correlation between Hubeiyichang and China is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management 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 China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and China Asset go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and China Asset

Assuming the 90 days trading horizon Hubeiyichang Transportation Group is expected to under-perform the China Asset. In addition to that, Hubeiyichang Transportation is 2.03 times more volatile than China Asset Management. It trades about -0.08 of its total potential returns per unit of risk. China Asset Management is currently generating about 0.26 per unit of volatility. If you would invest  314.00  in China Asset Management on October 8, 2024 and sell it today you would earn a total of  57.00  from holding China Asset Management or generate 18.15% return on investment over 90 days.

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

Hubeiyichang Transportation Gr  vs.  China Asset Management

Hubeiyichang Transportation

Risk-Adjusted Performance

0 of 100

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.

China Asset Management

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubeiyichang Transportation and China Asset

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

The idea behind Hubeiyichang Transportation Group and China Asset Management 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 Anywhere module to track or share privately all of your investments from the convenience of any device.