Correlation Between Sinocat Environmental and Hubei Yingtong

Can any of the company-specific risk be diversified away by investing in both Sinocat Environmental and Hubei Yingtong 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 Sinocat Environmental and Hubei Yingtong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinocat Environmental Technology and Hubei Yingtong Telecommunication, you can compare the effects of market volatilities on Sinocat Environmental and Hubei Yingtong 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 Sinocat Environmental with a short position of Hubei Yingtong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocat Environmental and Hubei Yingtong.

Diversification Opportunities for Sinocat Environmental and Hubei Yingtong

0.48

Correlation Coefficient

Sinocat Environmental  Hubei Yingtong

Very weak diversification

The 3 months correlation between Sinocat and Hubei is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Hubei Yingtong Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Yingtong Telec and Sinocat Environmental 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 Sinocat Environmental Technology are associated (or correlated) with Hubei Yingtong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Yingtong Telec has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Hubei Yingtong go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Hubei Yingtong

Assuming the 90 days trading horizon Sinocat Environmental is expected to generate 1.69 times less return on investment than Hubei Yingtong. But when comparing it to its historical volatility, Sinocat Environmental Technology is 1.28 times less risky than Hubei Yingtong. It trades about 0.05 of its potential returns per unit of risk. Hubei Yingtong Telecommunication is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,058  in Hubei Yingtong Telecommunication on September 30, 2024 and sell it today you would earn a total of  289.00  from holding Hubei Yingtong Telecommunication or generate 27.32% return on investment over 90 days.

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

Sinocat Environmental Technolo  vs.  Hubei Yingtong Telecommunicati

Sinocat Environmental

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubei Yingtong Telec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Yingtong Telecommunication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Yingtong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sinocat Environmental and Hubei Yingtong

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

The idea behind Sinocat Environmental Technology and Hubei Yingtong Telecommunication 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.