Correlation Between Hangzhou Gaoxin and Dazhong Transportation

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

By analyzing existing cross correlation between Hangzhou Gaoxin Rubber and Dazhong Transportation Group, you can compare the effects of market volatilities on Hangzhou Gaoxin and Dazhong Transportation 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 Hangzhou Gaoxin with a short position of Dazhong Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Gaoxin and Dazhong Transportation.

Diversification Opportunities for Hangzhou Gaoxin and Dazhong Transportation

0.9

Correlation Coefficient

Hangzhou Gaoxin  Dazhong Transportation

Almost no diversification

The 3 months correlation between Hangzhou and Dazhong is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Gaoxin Rubber and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation and Hangzhou Gaoxin 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 Hangzhou Gaoxin Rubber are associated (or correlated) with Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Hangzhou Gaoxin i.e., Hangzhou Gaoxin and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Hangzhou Gaoxin and Dazhong Transportation

Assuming the 90 days trading horizon Hangzhou Gaoxin Rubber is expected to generate 1.6 times more return on investment than Dazhong Transportation. However, Hangzhou Gaoxin is 1.6 times more volatile than Dazhong Transportation Group. It trades about -0.04 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about -0.11 per unit of risk. If you would invest  1,007  in Hangzhou Gaoxin Rubber on October 26, 2024 and sell it today you would lose (127.00) from holding Hangzhou Gaoxin Rubber or give up 12.61% of portfolio value over 90 days.

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

Hangzhou Gaoxin Rubber  vs.  Dazhong Transportation Group

Hangzhou Gaoxin Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Gaoxin Rubber 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.

Dazhong Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dazhong Transportation Group 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hangzhou Gaoxin and Dazhong Transportation

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

The idea behind Hangzhou Gaoxin Rubber and Dazhong Transportation Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.