Correlation Between Heilongjiang Transport and XinJiang GuoTong

Can any of the company-specific risk be diversified away by investing in both Heilongjiang Transport and XinJiang GuoTong 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 XinJiang GuoTong 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 XinJiang GuoTong Pipeline, you can compare the effects of market volatilities on Heilongjiang Transport and XinJiang GuoTong 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 XinJiang GuoTong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and XinJiang GuoTong.

Diversification Opportunities for Heilongjiang Transport and XinJiang GuoTong

0.77

Correlation Coefficient

Heilongjiang Transport  XinJiang GuoTong

Poor diversification

The 3 months correlation between Heilongjiang and XinJiang is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and XinJiang GuoTong Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XinJiang GuoTong Pipeline 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 XinJiang GuoTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XinJiang GuoTong Pipeline has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and XinJiang GuoTong go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and XinJiang GuoTong

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to under-perform the XinJiang GuoTong. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Transport Development is 1.59 times less risky than XinJiang GuoTong. The stock trades about -0.02 of its potential returns per unit of risk. The XinJiang GuoTong Pipeline is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  795.00  in XinJiang GuoTong Pipeline on October 21, 2024 and sell it today you would earn a total of  33.00  from holding XinJiang GuoTong Pipeline or generate 4.15% 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.  XinJiang GuoTong Pipeline

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.

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Heilongjiang Transport and XinJiang GuoTong

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

The idea behind Heilongjiang Transport Development and XinJiang GuoTong Pipeline 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.