Correlation Between Hubei Geoway and XinJiang GuoTong

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

By analyzing existing cross correlation between Hubei Geoway Investment and XinJiang GuoTong Pipeline, you can compare the effects of market volatilities on Hubei Geoway and XinJiang GuoTong 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 Hubei Geoway with a short position of XinJiang GuoTong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and XinJiang GuoTong.

Diversification Opportunities for Hubei Geoway and XinJiang GuoTong

0.86

Correlation Coefficient

Hubei Geoway  XinJiang GuoTong

Very poor diversification

The 3 months correlation between Hubei and XinJiang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and XinJiang GuoTong Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XinJiang GuoTong Pipeline and Hubei Geoway 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 Hubei Geoway Investment are associated (or correlated) with XinJiang GuoTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XinJiang GuoTong Pipeline has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and XinJiang GuoTong go up and down completely randomly.

Pair Corralation between Hubei Geoway and XinJiang GuoTong

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to generate 0.9 times more return on investment than XinJiang GuoTong. However, Hubei Geoway Investment is 1.11 times less risky than XinJiang GuoTong. It trades about 0.03 of its potential returns per unit of risk. XinJiang GuoTong Pipeline is currently generating about 0.03 per unit of risk. If you would invest  133.00  in Hubei Geoway Investment on October 9, 2024 and sell it today you would earn a total of  5.00  from holding Hubei Geoway Investment or generate 3.76% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  XinJiang GuoTong Pipeline

Hubei Geoway Investment

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XinJiang GuoTong Pipeline are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XinJiang GuoTong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hubei Geoway and XinJiang GuoTong

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

The idea behind Hubei Geoway Investment and XinJiang GuoTong Pipeline 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.