Correlation Between Hubei Yingtong and Changchun Engley

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

Diversification Opportunities for Hubei Yingtong and Changchun Engley

0.4

Correlation Coefficient

Hubei Yingtong  Changchun Engley

Very weak diversification

The 3 months correlation between Hubei and Changchun is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Changchun Engley Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun Engley Aut 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 Changchun Engley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun Engley Aut has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Changchun Engley go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Changchun Engley

Assuming the 90 days trading horizon Hubei Yingtong Telecommunication is expected to generate 2.58 times more return on investment than Changchun Engley. However, Hubei Yingtong is 2.58 times more volatile than Changchun Engley Automobile. It trades about 0.14 of its potential returns per unit of risk. Changchun Engley Automobile is currently generating about -0.1 per unit of risk. If you would invest  1,337  in Hubei Yingtong Telecommunication on October 24, 2024 and sell it today you would earn a total of  218.00  from holding Hubei Yingtong Telecommunication or generate 16.31% return on investment over 90 days.

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

Hubei Yingtong Telecommunicati  vs.  Changchun Engley Automobile

Hubei Yingtong Telec

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Yingtong Telecommunication are ranked lower than 6 (%) 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.

Changchun Engley Aut

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changchun Engley Automobile 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 Changchun Engley

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

The idea behind Hubei Yingtong Telecommunication and Changchun Engley Automobile 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.