Correlation Between Heilongjiang Transport and Shenzhen Kexin

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

Diversification Opportunities for Heilongjiang Transport and Shenzhen Kexin

0.34

Correlation Coefficient

Heilongjiang Transport  Shenzhen Kexin

Weak diversification

The 3 months correlation between Heilongjiang and Shenzhen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Shenzhen Kexin Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kexin Commu 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 Shenzhen Kexin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kexin Commu has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Shenzhen Kexin go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Shenzhen Kexin

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to under-perform the Shenzhen Kexin. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Transport Development is 1.97 times less risky than Shenzhen Kexin. The stock trades about -0.22 of its potential returns per unit of risk. The Shenzhen Kexin Communication is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,303  in Shenzhen Kexin Communication on October 25, 2024 and sell it today you would lose (20.00) from holding Shenzhen Kexin Communication or give up 1.53% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  Shenzhen Kexin Communication

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.

Shenzhen Kexin Commu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Kexin Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Heilongjiang Transport and Shenzhen Kexin

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

The idea behind Heilongjiang Transport Development and Shenzhen Kexin Communication 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.