Correlation Between Heilongjiang Transport and Xinxiang Chemical

Can any of the company-specific risk be diversified away by investing in both Heilongjiang Transport and Xinxiang Chemical 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 Heilongjiang Transport and Xinxiang Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heilongjiang Transport Development and Xinxiang Chemical Fiber, you can compare the effects of market volatilities on Heilongjiang Transport and Xinxiang Chemical 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 Heilongjiang Transport with a short position of Xinxiang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Xinxiang Chemical.

Diversification Opportunities for Heilongjiang Transport and Xinxiang Chemical

0.76

Correlation Coefficient

Heilongjiang Transport  Xinxiang Chemical

Poor diversification

The 3 months correlation between Heilongjiang and Xinxiang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Xinxiang Chemical Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinxiang Chemical Fiber and Heilongjiang Transport 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 Heilongjiang Transport Development are associated (or correlated) with Xinxiang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinxiang Chemical Fiber has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Xinxiang Chemical go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Xinxiang Chemical

Assuming the 90 days trading horizon Heilongjiang Transport is expected to generate 13.7 times less return on investment than Xinxiang Chemical. But when comparing it to its historical volatility, Heilongjiang Transport Development is 1.69 times less risky than Xinxiang Chemical. It trades about 0.0 of its potential returns per unit of risk. Xinxiang Chemical Fiber is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  370.00  in Xinxiang Chemical Fiber on October 10, 2024 and sell it today you would earn a total of  13.00  from holding Xinxiang Chemical Fiber or generate 3.51% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Xinxiang Chemical Fiber

Heilongjiang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xinxiang Chemical Fiber

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Heilongjiang Transport and Xinxiang Chemical

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

The idea behind Heilongjiang Transport Development and Xinxiang Chemical Fiber 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.