Correlation Between Heilongjiang Publishing and Hunan Oil

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

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

Diversification Opportunities for Heilongjiang Publishing and Hunan Oil

-0.28

Correlation Coefficient

Heilongjiang Publishing  Hunan Oil

Very good diversification

The 3 months correlation between Heilongjiang and Hunan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Publishing Media and Hunan Oil Pump in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Oil Pump and Heilongjiang Publishing 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 Heilongjiang Publishing Media are associated (or correlated) with Hunan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Oil Pump has no effect on the direction of Heilongjiang Publishing i.e., Heilongjiang Publishing and Hunan Oil go up and down completely randomly.

Pair Corralation between Heilongjiang Publishing and Hunan Oil

Assuming the 90 days trading horizon Heilongjiang Publishing Media is expected to under-perform the Hunan Oil. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Publishing Media is 1.93 times less risky than Hunan Oil. The stock trades about -0.16 of its potential returns per unit of risk. The Hunan Oil Pump is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,508  in Hunan Oil Pump on December 10, 2024 and sell it today you would earn a total of  1,498  from holding Hunan Oil Pump or generate 59.73% return on investment over 90 days.

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

Heilongjiang Publishing Media  vs.  Hunan Oil Pump

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 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.

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.

Pair Trading with Heilongjiang Publishing and Hunan Oil

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

The idea behind Heilongjiang Publishing Media and Hunan Oil Pump 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.