Correlation Between Wuhan Yangtze and CSSC Offshore

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Can any of the company-specific risk be diversified away by investing in both Wuhan Yangtze and CSSC Offshore 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 CSSC Offshore 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 CSSC Offshore Marine, you can compare the effects of market volatilities on Wuhan Yangtze and CSSC Offshore 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 CSSC Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Yangtze and CSSC Offshore.

Diversification Opportunities for Wuhan Yangtze and CSSC Offshore

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Wuhan and CSSC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Yangtze Communication and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Wuhan Yangtze i.e., Wuhan Yangtze and CSSC Offshore go up and down completely randomly.

Pair Corralation between Wuhan Yangtze and CSSC Offshore

Assuming the 90 days trading horizon Wuhan Yangtze Communication is expected to generate 1.44 times more return on investment than CSSC Offshore. However, Wuhan Yangtze is 1.44 times more volatile than CSSC Offshore Marine. It trades about 0.04 of its potential returns per unit of risk. CSSC Offshore Marine is currently generating about 0.02 per unit of risk. If you would invest  1,609  in Wuhan Yangtze Communication on October 4, 2024 and sell it today you would earn a total of  617.00  from holding Wuhan Yangtze Communication or generate 38.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Wuhan Yangtze Communication  vs.  CSSC Offshore Marine

 Performance 
       Timeline  
Wuhan Yangtze Commun 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.
CSSC Offshore Marine 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CSSC Offshore Marine 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.

Wuhan Yangtze and CSSC Offshore Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wuhan Yangtze and CSSC Offshore

The main advantage of trading using opposite Wuhan Yangtze and CSSC Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wuhan Yangtze position performs unexpectedly, CSSC Offshore 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 CSSC Offshore will offset losses from the drop in CSSC Offshore's long position.
The idea behind Wuhan Yangtze Communication and CSSC Offshore Marine 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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