Correlation Between Ping An and Hubeiyichang Transportation

Can any of the company-specific risk be diversified away by investing in both Ping An and Hubeiyichang Transportation 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 Ping An and Hubeiyichang Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Hubeiyichang Transportation Group, you can compare the effects of market volatilities on Ping An and Hubeiyichang Transportation 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 Ping An with a short position of Hubeiyichang Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Hubeiyichang Transportation.

Diversification Opportunities for Ping An and Hubeiyichang Transportation

0.86

Correlation Coefficient

Ping An  Hubeiyichang Transportation

Very poor diversification

The 3 months correlation between Ping and Hubeiyichang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation and Ping An 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 Ping An Insurance are associated (or correlated) with Hubeiyichang Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubeiyichang Transportation has no effect on the direction of Ping An i.e., Ping An and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Ping An and Hubeiyichang Transportation

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.36 times more return on investment than Hubeiyichang Transportation. However, Ping An is 1.36 times more volatile than Hubeiyichang Transportation Group. It trades about 0.13 of its potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about 0.13 per unit of risk. If you would invest  4,345  in Ping An Insurance on September 2, 2024 and sell it today you would earn a total of  980.00  from holding Ping An Insurance or generate 22.55% return on investment over 90 days.

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

Ping An Insurance  vs.  Hubeiyichang Transportation Gr

Ping An Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubeiyichang Transportation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubeiyichang Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Hubeiyichang Transportation

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

The idea behind Ping An Insurance and Hubeiyichang Transportation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.