Correlation Between Hubei Yingtong and Longjian Road

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

Diversification Opportunities for Hubei Yingtong and Longjian Road

0.08

Correlation Coefficient

Hubei Yingtong  Longjian Road

Significant diversification

The 3 months correlation between Hubei and Longjian is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Longjian Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longjian Road Bridge 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 Longjian Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longjian Road Bridge has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Longjian Road go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Longjian Road

Assuming the 90 days trading horizon Hubei Yingtong Telecommunication is expected to generate 2.97 times more return on investment than Longjian Road. However, Hubei Yingtong is 2.97 times more volatile than Longjian Road Bridge. It trades about 0.1 of its potential returns per unit of risk. Longjian Road Bridge is currently generating about -0.06 per unit of risk. If you would invest  1,338  in Hubei Yingtong Telecommunication on December 26, 2024 and sell it today you would earn a total of  376.00  from holding Hubei Yingtong Telecommunication or generate 28.1% 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.  Longjian Road Bridge

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.

Longjian Road Bridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longjian Road Bridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hubei Yingtong and Longjian Road

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

The idea behind Hubei Yingtong Telecommunication and Longjian Road Bridge 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.