Correlation Between Hubei Geoway and Changchun

Can any of the company-specific risk be diversified away by investing in both Hubei Geoway and Changchun 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 Changchun 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 Changchun UP Optotech, you can compare the effects of market volatilities on Hubei Geoway and Changchun 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 Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Changchun.

Diversification Opportunities for Hubei Geoway and Changchun

0.37

Correlation Coefficient

Hubei Geoway  Changchun

Weak diversification

The 3 months correlation between Hubei and Changchun is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech 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 Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Changchun go up and down completely randomly.

Pair Corralation between Hubei Geoway and Changchun

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Changchun. In addition to that, Hubei Geoway is 1.67 times more volatile than Changchun UP Optotech. It trades about -0.07 of its total potential returns per unit of risk. Changchun UP Optotech is currently generating about -0.07 per unit of volatility. If you would invest  4,155  in Changchun UP Optotech on September 30, 2024 and sell it today you would lose (175.00) from holding Changchun UP Optotech or give up 4.21% of portfolio value over 90 days.

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

Hubei Geoway Investment  vs.  Changchun UP Optotech

Hubei Geoway Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Changchun UP Optotech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Geoway and Changchun

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

The idea behind Hubei Geoway Investment and Changchun UP Optotech 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 Stocks Directory module to find actively traded stocks across global markets.