Correlation Between Industrial and Wuhan Xianglong

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

Diversification Opportunities for Industrial and Wuhan Xianglong

-0.44

Correlation Coefficient

Industrial  Wuhan Xianglong

Very good diversification

The 3 months correlation between Industrial and Wuhan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Wuhan Xianglong Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Xianglong Power 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 Wuhan Xianglong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Xianglong Power has no effect on the direction of Industrial i.e., Industrial and Wuhan Xianglong go up and down completely randomly.

Pair Corralation between Industrial and Wuhan Xianglong

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.35 times more return on investment than Wuhan Xianglong. However, Industrial and Commercial is 2.82 times less risky than Wuhan Xianglong. It trades about 0.09 of its potential returns per unit of risk. Wuhan Xianglong Power is currently generating about 0.02 per unit of risk. If you would invest  406.00  in Industrial and Commercial on October 10, 2024 and sell it today you would earn a total of  263.00  from holding Industrial and Commercial or generate 64.78% return on investment over 90 days.

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

Industrial and Commercial  vs.  Wuhan Xianglong Power

Industrial and Commercial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wuhan Xianglong Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Xianglong Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Xianglong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Wuhan Xianglong

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

The idea behind Industrial and Commercial and Wuhan Xianglong Power 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.