Correlation Between China Railway and Holitech Technology

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

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

Diversification Opportunities for China Railway and Holitech Technology

0.52

Correlation Coefficient

China Railway  Holitech Technology

Very weak diversification

The 3 months correlation between China and Holitech is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Holitech Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holitech Technology and China Railway 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 China Railway Construction are associated (or correlated) with Holitech Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holitech Technology has no effect on the direction of China Railway i.e., China Railway and Holitech Technology go up and down completely randomly.

Pair Corralation between China Railway and Holitech Technology

Assuming the 90 days trading horizon China Railway is expected to generate 1.42 times less return on investment than Holitech Technology. But when comparing it to its historical volatility, China Railway Construction is 2.86 times less risky than Holitech Technology. It trades about 0.15 of its potential returns per unit of risk. Holitech Technology Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Holitech Technology Co on September 27, 2024 and sell it today you would earn a total of  10.00  from holding Holitech Technology Co or generate 4.1% return on investment over 90 days.

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

China Railway Construction  vs.  Holitech Technology Co

China Railway Constr

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Railway sustained solid returns over the last few months and may actually be approaching a breakup point.

Holitech Technology

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Holitech Technology Co are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holitech Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and Holitech Technology

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

The idea behind China Railway Construction and Holitech Technology Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.