Correlation Between Hubei Yingtong and Shanghai Putailai

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

Diversification Opportunities for Hubei Yingtong and Shanghai Putailai

-0.07

Correlation Coefficient

Hubei Yingtong  Shanghai Putailai

Good diversification

The 3 months correlation between Hubei and Shanghai is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Shanghai Putailai New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Putailai New 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 Shanghai Putailai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Putailai New has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Shanghai Putailai go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Shanghai Putailai

Assuming the 90 days trading horizon Hubei Yingtong Telecommunication is expected to generate 1.63 times more return on investment than Shanghai Putailai. However, Hubei Yingtong is 1.63 times more volatile than Shanghai Putailai New. It trades about -0.04 of its potential returns per unit of risk. Shanghai Putailai New is currently generating about -0.19 per unit of risk. If you would invest  1,275  in Hubei Yingtong Telecommunication on October 9, 2024 and sell it today you would lose (156.00) from holding Hubei Yingtong Telecommunication or give up 12.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Hubei Yingtong Telecommunicati  vs.  Shanghai Putailai New

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 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.

Shanghai Putailai New

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Putailai New are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Putailai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hubei Yingtong and Shanghai Putailai

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

The idea behind Hubei Yingtong Telecommunication and Shanghai Putailai New 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.