Correlation Between Heilongjiang Transport and Guangdong Shenglu

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

Diversification Opportunities for Heilongjiang Transport and Guangdong Shenglu

0.9

Correlation Coefficient

Heilongjiang Transport  Guangdong Shenglu

Almost no diversification

The 3 months correlation between Heilongjiang and Guangdong is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Guangdong Shenglu Telecommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Shenglu 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 Guangdong Shenglu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Shenglu has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Guangdong Shenglu go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Guangdong Shenglu

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to under-perform the Guangdong Shenglu. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Transport Development is 1.34 times less risky than Guangdong Shenglu. The stock trades about -0.13 of its potential returns per unit of risk. The Guangdong Shenglu Telecommunication is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  756.00  in Guangdong Shenglu Telecommunication on December 5, 2024 and sell it today you would lose (120.00) from holding Guangdong Shenglu Telecommunication or give up 15.87% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  Guangdong Shenglu Telecommunic

Heilongjiang Transport

Risk-Adjusted Performance

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 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.

Guangdong Shenglu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Shenglu Telecommunication 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 Heilongjiang Transport and Guangdong Shenglu

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

The idea behind Heilongjiang Transport Development and Guangdong Shenglu Telecommunication 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.