Correlation Between State Grid and Hunan Airbluer

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

By analyzing existing cross correlation between State Grid InformationCommunication and Hunan Airbluer Environmental, you can compare the effects of market volatilities on State Grid and Hunan Airbluer 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 State Grid with a short position of Hunan Airbluer. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Hunan Airbluer.

Diversification Opportunities for State Grid and Hunan Airbluer

0.42

Correlation Coefficient

State Grid  Hunan Airbluer

Very weak diversification

The 3 months correlation between State and Hunan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Hunan Airbluer Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Airbluer Envir and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Hunan Airbluer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Airbluer Envir has no effect on the direction of State Grid i.e., State Grid and Hunan Airbluer go up and down completely randomly.

Pair Corralation between State Grid and Hunan Airbluer

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Hunan Airbluer. But the stock apears to be less risky and, when comparing its historical volatility, State Grid InformationCommunication is 1.22 times less risky than Hunan Airbluer. The stock trades about -0.36 of its potential returns per unit of risk. The Hunan Airbluer Environmental is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,590  in Hunan Airbluer Environmental on October 10, 2024 and sell it today you would earn a total of  258.00  from holding Hunan Airbluer Environmental or generate 5.62% return on investment over 90 days.

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

State Grid InformationCommunic  vs.  Hunan Airbluer Environmental

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hunan Airbluer Envir

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Airbluer Environmental are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Airbluer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Grid and Hunan Airbluer

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

The idea behind State Grid InformationCommunication and Hunan Airbluer Environmental 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.