Correlation Between Hubei Yingtong and Sublime China

Can any of the company-specific risk be diversified away by investing in both Hubei Yingtong and Sublime China 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 Hubei Yingtong and Sublime China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Yingtong Telecommunication and Sublime China Information, you can compare the effects of market volatilities on Hubei Yingtong and Sublime China 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 Hubei Yingtong with a short position of Sublime China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Yingtong and Sublime China.

Diversification Opportunities for Hubei Yingtong and Sublime China

0.7

Correlation Coefficient

Hubei Yingtong  Sublime China

Poor diversification

The 3 months correlation between Hubei and Sublime is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Sublime China Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sublime China Information and Hubei Yingtong 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 Hubei Yingtong Telecommunication are associated (or correlated) with Sublime China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sublime China Information has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Sublime China go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Sublime China

Assuming the 90 days trading horizon Hubei Yingtong is expected to generate 1.02 times less return on investment than Sublime China. In addition to that, Hubei Yingtong is 1.19 times more volatile than Sublime China Information. It trades about 0.1 of its total potential returns per unit of risk. Sublime China Information is currently generating about 0.13 per unit of volatility. If you would invest  5,354  in Sublime China Information on December 25, 2024 and sell it today you would earn a total of  1,756  from holding Sublime China Information or generate 32.8% return on investment over 90 days.

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

Hubei Yingtong Telecommunicati  vs.  Sublime China Information

Hubei Yingtong Telec

Risk-Adjusted Performance

OK

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

Sublime China Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sublime China Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sublime China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Yingtong and Sublime China

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

The idea behind Hubei Yingtong Telecommunication and Sublime China Information 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.