Correlation Between Guangdong Banbao and Heilongjiang Transport

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

By analyzing existing cross correlation between Guangdong Banbao Toy and Heilongjiang Transport Development, you can compare the effects of market volatilities on Guangdong Banbao and Heilongjiang Transport 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 Guangdong Banbao with a short position of Heilongjiang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Banbao and Heilongjiang Transport.

Diversification Opportunities for Guangdong Banbao and Heilongjiang Transport

0.62

Correlation Coefficient

Guangdong Banbao  Heilongjiang Transport

Poor diversification

The 3 months correlation between Guangdong and Heilongjiang is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Banbao Toy and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport and Guangdong Banbao 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 Guangdong Banbao Toy are associated (or correlated) with Heilongjiang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Transport has no effect on the direction of Guangdong Banbao i.e., Guangdong Banbao and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Guangdong Banbao and Heilongjiang Transport

Assuming the 90 days trading horizon Guangdong Banbao Toy is expected to under-perform the Heilongjiang Transport. In addition to that, Guangdong Banbao is 3.15 times more volatile than Heilongjiang Transport Development. It trades about -0.19 of its total potential returns per unit of risk. Heilongjiang Transport Development is currently generating about -0.12 per unit of volatility. If you would invest  363.00  in Heilongjiang Transport Development on December 29, 2024 and sell it today you would lose (33.00) from holding Heilongjiang Transport Development or give up 9.09% of portfolio value over 90 days.

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

Guangdong Banbao Toy  vs.  Heilongjiang Transport Develop

Guangdong Banbao Toy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Banbao Toy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Heilongjiang Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heilongjiang Transport Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangdong Banbao and Heilongjiang Transport

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

The idea behind Guangdong Banbao Toy and Heilongjiang Transport Development 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.