Correlation Between Heilongjiang Transport and Shandong Homey

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

Diversification Opportunities for Heilongjiang Transport and Shandong Homey

0.89

Correlation Coefficient

Heilongjiang Transport  Shandong Homey

Very poor diversification

The 3 months correlation between Heilongjiang and Shandong is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Shandong Homey go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Shandong Homey

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 0.59 times more return on investment than Shandong Homey. However, Heilongjiang Transport Development is 1.69 times less risky than Shandong Homey. It trades about -0.11 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about -0.08 per unit of risk. If you would invest  387.00  in Heilongjiang Transport Development on October 8, 2024 and sell it today you would lose (48.00) from holding Heilongjiang Transport Development or give up 12.4% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  Shandong Homey Aquatic

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.

Shandong Homey Aquatic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Heilongjiang Transport and Shandong Homey

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

The idea behind Heilongjiang Transport Development and Shandong Homey Aquatic 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.