Correlation Between Hubei Yingtong and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both Hubei Yingtong and Gansu Jiu 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 Gansu Jiu 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 Gansu Jiu Steel, you can compare the effects of market volatilities on Hubei Yingtong and Gansu Jiu 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 Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Yingtong and Gansu Jiu.

Diversification Opportunities for Hubei Yingtong and Gansu Jiu

0.1

Correlation Coefficient

Hubei Yingtong  Gansu Jiu

Average diversification

The 3 months correlation between Hubei and Gansu is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel 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 Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Gansu Jiu go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Gansu Jiu

Assuming the 90 days trading horizon Hubei Yingtong Telecommunication is expected to generate 2.11 times more return on investment than Gansu Jiu. However, Hubei Yingtong is 2.11 times more volatile than Gansu Jiu Steel. It trades about 0.04 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.01 per unit of risk. If you would invest  1,020  in Hubei Yingtong Telecommunication on October 4, 2024 and sell it today you would earn a total of  389.00  from holding Hubei Yingtong Telecommunication or generate 38.14% return on investment over 90 days.

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

Hubei Yingtong Telecommunicati  vs.  Gansu Jiu Steel

Hubei Yingtong Telec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Yingtong Telecommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Yingtong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gansu Jiu Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hubei Yingtong and Gansu Jiu

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

The idea behind Hubei Yingtong Telecommunication and Gansu Jiu Steel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.