Correlation Between Wuhan Yangtze and China High

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

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

Diversification Opportunities for Wuhan Yangtze and China High

0.35

Correlation Coefficient

Wuhan Yangtze  China High

Weak diversification

The 3 months correlation between Wuhan and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Yangtze Communication and China High Speed Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China High Speed and Wuhan Yangtze 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 Wuhan Yangtze Communication are associated (or correlated) with China High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China High Speed has no effect on the direction of Wuhan Yangtze i.e., Wuhan Yangtze and China High go up and down completely randomly.

Pair Corralation between Wuhan Yangtze and China High

Assuming the 90 days trading horizon Wuhan Yangtze Communication is expected to generate 1.21 times more return on investment than China High. However, Wuhan Yangtze is 1.21 times more volatile than China High Speed Railway. It trades about 0.05 of its potential returns per unit of risk. China High Speed Railway is currently generating about -0.07 per unit of risk. If you would invest  2,413  in Wuhan Yangtze Communication on December 24, 2024 and sell it today you would earn a total of  152.00  from holding Wuhan Yangtze Communication or generate 6.3% return on investment over 90 days.

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

Wuhan Yangtze Communication  vs.  China High Speed Railway

Wuhan Yangtze Commun

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China High Speed

Risk-Adjusted Performance

Very Weak

Over the last 90 days China High Speed Railway 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.

Pair Trading with Wuhan Yangtze and China High

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

The idea behind Wuhan Yangtze Communication and China High Speed Railway 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.