Correlation Between Shandong Sino and Heilongjiang Transport

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Can any of the company-specific risk be diversified away by investing in both Shandong Sino and Heilongjiang Transport 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 Shandong Sino and Heilongjiang Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shandong Sino Agri United and Heilongjiang Transport Development, you can compare the effects of market volatilities on Shandong Sino and Heilongjiang Transport 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 Shandong Sino with a short position of Heilongjiang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sino and Heilongjiang Transport.

Diversification Opportunities for Shandong Sino and Heilongjiang Transport

ShandongHeilongjiangDiversified AwayShandongHeilongjiangDiversified Away100%
0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Shandong and Heilongjiang is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sino Agri United and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport and Shandong Sino 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 Shandong Sino Agri United are associated (or correlated) with Heilongjiang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Transport has no effect on the direction of Shandong Sino i.e., Shandong Sino and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Shandong Sino and Heilongjiang Transport

Assuming the 90 days trading horizon Shandong Sino Agri United is expected to under-perform the Heilongjiang Transport. In addition to that, Shandong Sino is 1.0 times more volatile than Heilongjiang Transport Development. It trades about -0.02 of its total potential returns per unit of risk. Heilongjiang Transport Development is currently generating about 0.01 per unit of volatility. If you would invest  336.00  in Heilongjiang Transport Development on November 29, 2024 and sell it today you would lose (5.00) from holding Heilongjiang Transport Development or give up 1.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.79%
ValuesDaily Returns

Shandong Sino Agri United  vs.  Heilongjiang Transport Develop

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030
JavaScript chart by amCharts 3.21.15003042 601188
       Timeline  
Shandong Sino Agri 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Shandong Sino Agri United has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb131415161718192021
Heilongjiang Transport 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Heilongjiang Transport Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.23.43.63.844.24.4

Shandong Sino and Heilongjiang Transport Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.01-9.75-6.48-3.21-0.05453.236.579.9113.2516.58 0.020.040.060.08
JavaScript chart by amCharts 3.21.15003042 601188
       Returns  

Pair Trading with Shandong Sino and Heilongjiang Transport

The main advantage of trading using opposite Shandong Sino and Heilongjiang Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Sino position performs unexpectedly, Heilongjiang Transport 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 Heilongjiang Transport will offset losses from the drop in Heilongjiang Transport's long position.
The idea behind Shandong Sino Agri United and Heilongjiang Transport Development 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.
Check out your portfolio center.
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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