Correlation Between Dongbang Transport and Husteel

Can any of the company-specific risk be diversified away by investing in both Dongbang Transport and Husteel 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 Dongbang Transport and Husteel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongbang Transport Logistics and Husteel, you can compare the effects of market volatilities on Dongbang Transport and Husteel 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 Dongbang Transport with a short position of Husteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Husteel.

Diversification Opportunities for Dongbang Transport and Husteel

0.69

Correlation Coefficient

Dongbang Transport  Husteel

Poor diversification

The 3 months correlation between Dongbang and Husteel is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Husteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husteel and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Husteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husteel has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Husteel go up and down completely randomly.

Pair Corralation between Dongbang Transport and Husteel

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 1.79 times more return on investment than Husteel. However, Dongbang Transport is 1.79 times more volatile than Husteel. It trades about 0.02 of its potential returns per unit of risk. Husteel is currently generating about -0.02 per unit of risk. If you would invest  204,500  in Dongbang Transport Logistics on September 23, 2024 and sell it today you would earn a total of  10,000  from holding Dongbang Transport Logistics or generate 4.89% return on investment over 90 days.

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

Dongbang Transport Logistics  vs.  Husteel

Dongbang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongbang Transport Logistics 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Husteel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dongbang Transport and Husteel

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

The idea behind Dongbang Transport Logistics and Husteel 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.