Correlation Between Eastroc Beverage and Heilongjiang Transport

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

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

Diversification Opportunities for Eastroc Beverage and Heilongjiang Transport

0.2

Correlation Coefficient

Eastroc Beverage  Heilongjiang Transport

Modest diversification

The 3 months correlation between Eastroc and Heilongjiang is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport and Eastroc Beverage 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 Eastroc Beverage Group 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 Eastroc Beverage i.e., Eastroc Beverage and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Heilongjiang Transport

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 1.99 times more return on investment than Heilongjiang Transport. However, Eastroc Beverage is 1.99 times more volatile than Heilongjiang Transport Development. It trades about -0.01 of its potential returns per unit of risk. Heilongjiang Transport Development is currently generating about -0.12 per unit of risk. If you would invest  24,645  in Eastroc Beverage Group on December 28, 2024 and sell it today you would lose (895.00) from holding Eastroc Beverage Group or give up 3.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Eastroc Beverage Group  vs.  Heilongjiang Transport Develop

Eastroc Beverage

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Eastroc Beverage and Heilongjiang Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastroc Beverage 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 Eastroc Beverage Group 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.