Correlation Between Hubeiyichang Transportation and Beijing Shanghai

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

Diversification Opportunities for Hubeiyichang Transportation and Beijing Shanghai

0.81

Correlation Coefficient

Hubeiyichang Transportation  Beijing Shanghai

Very poor diversification

The 3 months correlation between Hubeiyichang and Beijing is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Beijing Shanghai High Speed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shanghai High 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 Beijing Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shanghai High has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Beijing Shanghai go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Beijing Shanghai

Assuming the 90 days trading horizon Hubeiyichang Transportation is expected to generate 2.68 times less return on investment than Beijing Shanghai. But when comparing it to its historical volatility, Hubeiyichang Transportation Group is 1.05 times less risky than Beijing Shanghai. It trades about 0.08 of its potential returns per unit of risk. Beijing Shanghai High Speed is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Beijing Shanghai High Speed on September 22, 2024 and sell it today you would earn a total of  44.00  from holding Beijing Shanghai High Speed or generate 7.83% return on investment over 90 days.

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

Hubeiyichang Transportation Gr  vs.  Beijing Shanghai High Speed

Hubeiyichang Transportation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubeiyichang Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Shanghai High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Shanghai High Speed are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Shanghai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubeiyichang Transportation and Beijing Shanghai

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

The idea behind Hubeiyichang Transportation Group and Beijing Shanghai High Speed 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.