Correlation Between Hubeiyichang Transportation and Sinomach Automobile

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

Diversification Opportunities for Hubeiyichang Transportation and Sinomach Automobile

0.76

Correlation Coefficient

Hubeiyichang Transportation  Sinomach Automobile

Poor diversification

The 3 months correlation between Hubeiyichang and Sinomach is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Sinomach Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach Automobile 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 Sinomach Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach Automobile has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Sinomach Automobile go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Sinomach Automobile

Assuming the 90 days trading horizon Hubeiyichang Transportation is expected to generate 2.15 times less return on investment than Sinomach Automobile. But when comparing it to its historical volatility, Hubeiyichang Transportation Group is 1.29 times less risky than Sinomach Automobile. It trades about 0.04 of its potential returns per unit of risk. Sinomach Automobile Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Sinomach Automobile Co on December 29, 2024 and sell it today you would earn a total of  38.00  from holding Sinomach Automobile Co or generate 5.85% return on investment over 90 days.

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

Hubeiyichang Transportation Gr  vs.  Sinomach Automobile Co

Hubeiyichang Transportation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 3 (%) 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.

Sinomach Automobile

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach Automobile Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach Automobile may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hubeiyichang Transportation and Sinomach Automobile

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

The idea behind Hubeiyichang Transportation Group and Sinomach Automobile Co 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.