Correlation Between Heilongjiang Transport and Hubeiyichang Transportation

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

Diversification Opportunities for Heilongjiang Transport and Hubeiyichang Transportation

0.96

Correlation Coefficient

Heilongjiang Transport  Hubeiyichang Transportation

Almost no diversification

The 3 months correlation between Heilongjiang and Hubeiyichang is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation 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 Hubeiyichang Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubeiyichang Transportation has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Hubeiyichang Transportation

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to under-perform the Hubeiyichang Transportation. In addition to that, Heilongjiang Transport is 1.57 times more volatile than Hubeiyichang Transportation Group. It trades about -0.03 of its total potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about -0.02 per unit of volatility. If you would invest  524.00  in Hubeiyichang Transportation Group on September 24, 2024 and sell it today you would lose (7.00) from holding Hubeiyichang Transportation Group or give up 1.34% 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.  Hubeiyichang Transportation Gr

Heilongjiang Transport

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heilongjiang Transport sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubeiyichang Transportation

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubeiyichang Transportation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heilongjiang Transport and Hubeiyichang Transportation

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

The idea behind Heilongjiang Transport Development and Hubeiyichang Transportation Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.