Correlation Between Heilongjiang Transport and SI TECH

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

Diversification Opportunities for Heilongjiang Transport and SI TECH

0.32

Correlation Coefficient

Heilongjiang Transport  SI TECH

Weak diversification

The 3 months correlation between Heilongjiang and 300608 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and SI TECH Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SI TECH Information 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 SI TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SI TECH Information has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and SI TECH go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and SI TECH

Assuming the 90 days trading horizon Heilongjiang Transport is expected to generate 1.75 times less return on investment than SI TECH. But when comparing it to its historical volatility, Heilongjiang Transport Development is 1.46 times less risky than SI TECH. It trades about 0.04 of its potential returns per unit of risk. SI TECH Information Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  847.00  in SI TECH Information Technology on October 8, 2024 and sell it today you would earn a total of  144.00  from holding SI TECH Information Technology or generate 17.0% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  SI TECH Information Technology

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 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.

SI TECH Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SI TECH Information Technology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Heilongjiang Transport and SI TECH

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

The idea behind Heilongjiang Transport Development and SI TECH Information Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.