Correlation Between Hunan Oil and Heilongjiang Publishing

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

By analyzing existing cross correlation between Hunan Oil Pump and Heilongjiang Publishing Media, you can compare the effects of market volatilities on Hunan Oil and Heilongjiang Publishing 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 Hunan Oil with a short position of Heilongjiang Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Oil and Heilongjiang Publishing.

Diversification Opportunities for Hunan Oil and Heilongjiang Publishing

-0.11

Correlation Coefficient

Hunan Oil  Heilongjiang Publishing

Good diversification

The 3 months correlation between Hunan and Heilongjiang is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Oil Pump and Heilongjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Publishing and Hunan Oil 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 Hunan Oil Pump are associated (or correlated) with Heilongjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Publishing has no effect on the direction of Hunan Oil i.e., Hunan Oil and Heilongjiang Publishing go up and down completely randomly.

Pair Corralation between Hunan Oil and Heilongjiang Publishing

Assuming the 90 days trading horizon Hunan Oil Pump is expected to generate 2.53 times more return on investment than Heilongjiang Publishing. However, Hunan Oil is 2.53 times more volatile than Heilongjiang Publishing Media. It trades about 0.18 of its potential returns per unit of risk. Heilongjiang Publishing Media is currently generating about -0.05 per unit of risk. If you would invest  2,125  in Hunan Oil Pump on December 27, 2024 and sell it today you would earn a total of  1,259  from holding Hunan Oil Pump or generate 59.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Hunan Oil Pump  vs.  Heilongjiang Publishing Media

Hunan Oil Pump

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Oil Pump are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Heilongjiang Publishing

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hunan Oil and Heilongjiang Publishing

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

The idea behind Hunan Oil Pump and Heilongjiang Publishing Media 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.