Correlation Between Chinese Universe and Heilongjiang Transport

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

By analyzing existing cross correlation between Chinese Universe Publishing and Heilongjiang Transport Development, you can compare the effects of market volatilities on Chinese Universe and Heilongjiang Transport 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 Chinese Universe with a short position of Heilongjiang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and Heilongjiang Transport.

Diversification Opportunities for Chinese Universe and Heilongjiang Transport

-0.4

Correlation Coefficient

Chinese Universe  Heilongjiang Transport

Very good diversification

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

Pair Corralation between Chinese Universe and Heilongjiang Transport

Assuming the 90 days trading horizon Chinese Universe Publishing is expected to under-perform the Heilongjiang Transport. But the stock apears to be less risky and, when comparing its historical volatility, Chinese Universe Publishing is 1.09 times less risky than Heilongjiang Transport. The stock trades about -0.14 of its potential returns per unit of risk. The Heilongjiang Transport Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  371.00  in Heilongjiang Transport Development on October 1, 2024 and sell it today you would lose (3.00) from holding Heilongjiang Transport Development or give up 0.81% of portfolio value over 90 days.

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

Chinese Universe Publishing  vs.  Heilongjiang Transport Develop

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Heilongjiang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chinese Universe and Heilongjiang Transport

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

The idea behind Chinese Universe Publishing and Heilongjiang Transport Development 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.