Correlation Between HYBRIGENICS and China Railway

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

By analyzing existing cross correlation between HYBRIGENICS A and China Railway Signal, you can compare the effects of market volatilities on HYBRIGENICS and China Railway 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 HYBRIGENICS with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYBRIGENICS and China Railway.

Diversification Opportunities for HYBRIGENICS and China Railway

-0.81

Correlation Coefficient

HYBRIGENICS  China Railway

Pay attention - limited upside

The 3 months correlation between HYBRIGENICS and China is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding HYBRIGENICS A and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal and HYBRIGENICS 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 HYBRIGENICS A are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Signal has no effect on the direction of HYBRIGENICS i.e., HYBRIGENICS and China Railway go up and down completely randomly.

Pair Corralation between HYBRIGENICS and China Railway

Assuming the 90 days trading horizon HYBRIGENICS A is expected to under-perform the China Railway. In addition to that, HYBRIGENICS is 1.3 times more volatile than China Railway Signal. It trades about -0.01 of its total potential returns per unit of risk. China Railway Signal is currently generating about 0.06 per unit of volatility. If you would invest  14.00  in China Railway Signal on October 22, 2024 and sell it today you would earn a total of  24.00  from holding China Railway Signal or generate 171.43% return on investment over 90 days.

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

HYBRIGENICS A   vs.  China Railway Signal

HYBRIGENICS A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HYBRIGENICS A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Railway Signal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Signal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HYBRIGENICS and China Railway

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

The idea behind HYBRIGENICS A and China Railway Signal 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.