Correlation Between Heilongjiang Transport and National Silicon

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

Diversification Opportunities for Heilongjiang Transport and National Silicon

0.16

Correlation Coefficient

Heilongjiang Transport  National Silicon

Average diversification

The 3 months correlation between Heilongjiang and National is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry 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 National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and National Silicon go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and National Silicon

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 0.9 times more return on investment than National Silicon. However, Heilongjiang Transport Development is 1.11 times less risky than National Silicon. It trades about -0.08 of its potential returns per unit of risk. National Silicon Industry is currently generating about -0.15 per unit of risk. If you would invest  376.00  in Heilongjiang Transport Development on October 7, 2024 and sell it today you would lose (37.00) from holding Heilongjiang Transport Development or give up 9.84% of portfolio value over 90 days.

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

Heilongjiang Transport Develop  vs.  National Silicon Industry

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.

National Silicon Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Silicon Industry 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 National Silicon

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

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