Correlation Between Hubeiyichang Transportation and Jiangsu Zhongtian

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

Diversification Opportunities for Hubeiyichang Transportation and Jiangsu Zhongtian

0.84

Correlation Coefficient

Hubeiyichang Transportation  Jiangsu Zhongtian

Very poor diversification

The 3 months correlation between Hubeiyichang and Jiangsu is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Jiangsu Zhongtian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Zhongtian 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 Jiangsu Zhongtian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Zhongtian has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Jiangsu Zhongtian go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Jiangsu Zhongtian

Assuming the 90 days trading horizon Hubeiyichang Transportation Group is expected to generate 0.66 times more return on investment than Jiangsu Zhongtian. However, Hubeiyichang Transportation Group is 1.52 times less risky than Jiangsu Zhongtian. It trades about 0.04 of its potential returns per unit of risk. Jiangsu Zhongtian Technology is currently generating about 0.01 per unit of risk. If you would invest  509.00  in Hubeiyichang Transportation Group on December 29, 2024 and sell it today you would earn a total of  13.00  from holding Hubeiyichang Transportation Group or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Hubeiyichang Transportation Gr  vs.  Jiangsu Zhongtian Technology

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.

Jiangsu Zhongtian

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Zhongtian Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangsu Zhongtian 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 Jiangsu Zhongtian

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

The idea behind Hubeiyichang Transportation Group and Jiangsu Zhongtian Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.