Correlation Between Hunan Tyen and China High

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

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

Diversification Opportunities for Hunan Tyen and China High

-0.02

Correlation Coefficient

Hunan Tyen  China High

Good diversification

The 3 months correlation between Hunan and China is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery 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 Hunan Tyen 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 Hunan Tyen Machinery 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 Hunan Tyen i.e., Hunan Tyen and China High go up and down completely randomly.

Pair Corralation between Hunan Tyen and China High

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 1.46 times more return on investment than China High. However, Hunan Tyen is 1.46 times more volatile than China High Speed Railway. It trades about 0.23 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  487.00  in Hunan Tyen Machinery on December 24, 2024 and sell it today you would earn a total of  283.00  from holding Hunan Tyen Machinery or generate 58.11% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  China High Speed Railway

Hunan Tyen Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Hunan Tyen and China High

The main advantage of trading using opposite Hunan Tyen and China High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Tyen 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 Hunan Tyen Machinery 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.