Correlation Between Wuhan Xianglong and Vanfund Urban

Can any of the company-specific risk be diversified away by investing in both Wuhan Xianglong and Vanfund Urban 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 Xianglong and Vanfund Urban into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wuhan Xianglong Power and Vanfund Urban Investment, you can compare the effects of market volatilities on Wuhan Xianglong and Vanfund Urban 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 Xianglong with a short position of Vanfund Urban. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Xianglong and Vanfund Urban.

Diversification Opportunities for Wuhan Xianglong and Vanfund Urban

0.84

Correlation Coefficient

Wuhan Xianglong  Vanfund Urban

Very poor diversification

The 3 months correlation between Wuhan and Vanfund is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Xianglong Power and Vanfund Urban Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanfund Urban Investment and Wuhan Xianglong 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 Xianglong Power are associated (or correlated) with Vanfund Urban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanfund Urban Investment has no effect on the direction of Wuhan Xianglong i.e., Wuhan Xianglong and Vanfund Urban go up and down completely randomly.

Pair Corralation between Wuhan Xianglong and Vanfund Urban

Assuming the 90 days trading horizon Wuhan Xianglong Power is expected to generate 1.05 times more return on investment than Vanfund Urban. However, Wuhan Xianglong is 1.05 times more volatile than Vanfund Urban Investment. It trades about 0.07 of its potential returns per unit of risk. Vanfund Urban Investment is currently generating about 0.02 per unit of risk. If you would invest  941.00  in Wuhan Xianglong Power on December 2, 2024 and sell it today you would earn a total of  26.00  from holding Wuhan Xianglong Power or generate 2.76% return on investment over 90 days.

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

Wuhan Xianglong Power  vs.  Vanfund Urban Investment

Wuhan Xianglong Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wuhan Xianglong Power 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vanfund Urban Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanfund Urban Investment 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Wuhan Xianglong and Vanfund Urban

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

The idea behind Wuhan Xianglong Power and Vanfund Urban Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.