Correlation Between Hubeiyichang Transportation and Mengtian Home

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

Diversification Opportunities for Hubeiyichang Transportation and Mengtian Home

0.58

Correlation Coefficient

Hubeiyichang Transportation  Mengtian Home

Very weak diversification

The 3 months correlation between Hubeiyichang and Mengtian is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Mengtian Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mengtian Home Group 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 Mengtian Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mengtian Home Group has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Mengtian Home go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Mengtian Home

Assuming the 90 days trading horizon Hubeiyichang Transportation Group is expected to under-perform the Mengtian Home. But the stock apears to be less risky and, when comparing its historical volatility, Hubeiyichang Transportation Group is 1.12 times less risky than Mengtian Home. The stock trades about -0.12 of its potential returns per unit of risk. The Mengtian Home Group is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,119  in Mengtian Home Group on October 22, 2024 and sell it today you would lose (48.00) from holding Mengtian Home Group or give up 4.29% of portfolio value over 90 days.

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

Hubeiyichang Transportation Gr  vs.  Mengtian Home Group

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 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.

Mengtian Home Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hubeiyichang Transportation and Mengtian Home

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

The idea behind Hubeiyichang Transportation Group and Mengtian Home Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.