Correlation Between Industrial and Hubeiyichang Transportation

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

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

Diversification Opportunities for Industrial and Hubeiyichang Transportation

0.41

Correlation Coefficient

Industrial  Hubeiyichang Transportation

Very weak diversification

The 3 months correlation between Industrial and Hubeiyichang is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Industrial and Hubeiyichang Transportation

Assuming the 90 days trading horizon Industrial is expected to generate 3.98 times less return on investment than Hubeiyichang Transportation. But when comparing it to its historical volatility, Industrial and Commercial is 1.37 times less risky than Hubeiyichang Transportation. It trades about 0.05 of its potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  460.00  in Hubeiyichang Transportation Group on September 2, 2024 and sell it today you would earn a total of  76.00  from holding Hubeiyichang Transportation Group or generate 16.52% return on investment over 90 days.

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

Industrial and Commercial  vs.  Hubeiyichang Transportation Gr

Industrial and Commercial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Industrial and Hubeiyichang Transportation

The main advantage of trading using opposite Industrial and Hubeiyichang Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.