Correlation Between Heilongjiang Transport and Mengtian Home

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

Diversification Opportunities for Heilongjiang Transport and Mengtian Home

0.69

Correlation Coefficient

Heilongjiang Transport  Mengtian Home

Poor diversification

The 3 months correlation between Heilongjiang and Mengtian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Mengtian Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mengtian Home Group 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 Mengtian Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mengtian Home Group has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Mengtian Home go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Mengtian Home

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to under-perform the Mengtian Home. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Transport Development is 1.01 times less risky than Mengtian Home. The stock trades about -0.02 of its potential returns per unit of risk. The Mengtian Home Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,274  in Mengtian Home Group on October 9, 2024 and sell it today you would lose (181.00) from holding Mengtian Home Group or give up 14.21% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  Mengtian Home Group

Heilongjiang Transport

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Mengtian Home Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heilongjiang Transport and Mengtian Home

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

The idea behind Heilongjiang Transport Development and Mengtian Home 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.