Correlation Between Xiamen Goldenhome and Hubeiyichang Transportation

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

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

Diversification Opportunities for Xiamen Goldenhome and Hubeiyichang Transportation

0.85

Correlation Coefficient

Xiamen Goldenhome  Hubeiyichang Transportation

Very poor diversification

The 3 months correlation between Xiamen and Hubeiyichang is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation and Xiamen Goldenhome 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 Xiamen Goldenhome Co 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 Xiamen Goldenhome i.e., Xiamen Goldenhome and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Hubeiyichang Transportation

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to under-perform the Hubeiyichang Transportation. In addition to that, Xiamen Goldenhome is 1.22 times more volatile than Hubeiyichang Transportation Group. It trades about -0.03 of its total potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about -0.01 per unit of volatility. If you would invest  533.00  in Hubeiyichang Transportation Group on October 9, 2024 and sell it today you would lose (54.00) from holding Hubeiyichang Transportation Group or give up 10.13% of portfolio value over 90 days.

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

Xiamen Goldenhome Co  vs.  Hubeiyichang Transportation Gr

Xiamen Goldenhome

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Goldenhome Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiamen Goldenhome 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

0 of 100

Very Weak

Over the last 90 days Hubeiyichang Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubeiyichang Transportation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiamen Goldenhome and Hubeiyichang Transportation

The main advantage of trading using opposite Xiamen Goldenhome and Hubeiyichang Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen Goldenhome 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 Xiamen Goldenhome Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.