Correlation Between Heilongjiang Transport and Guangdong Banbao

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

Diversification Opportunities for Heilongjiang Transport and Guangdong Banbao

0.67

Correlation Coefficient

Heilongjiang Transport  Guangdong Banbao

Poor diversification

The 3 months correlation between Heilongjiang and Guangdong is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Guangdong Banbao Toy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Banbao Toy 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 Guangdong Banbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Banbao Toy has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Guangdong Banbao go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Guangdong Banbao

Assuming the 90 days trading horizon Heilongjiang Transport is expected to generate 12.95 times less return on investment than Guangdong Banbao. But when comparing it to its historical volatility, Heilongjiang Transport Development is 2.31 times less risky than Guangdong Banbao. It trades about 0.02 of its potential returns per unit of risk. Guangdong Banbao Toy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,616  in Guangdong Banbao Toy on October 9, 2024 and sell it today you would earn a total of  460.00  from holding Guangdong Banbao Toy or generate 28.47% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Guangdong Banbao Toy

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.

Guangdong Banbao Toy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Banbao Toy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Banbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heilongjiang Transport and Guangdong Banbao

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

The idea behind Heilongjiang Transport Development and Guangdong Banbao Toy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .