Correlation Between Transport International and Yuexiu Transport

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

By analyzing existing cross correlation between Transport International Holdings and Yuexiu Transport Infrastructure, you can compare the effects of market volatilities on Transport International and Yuexiu 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 Transport International with a short position of Yuexiu Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and Yuexiu Transport.

Diversification Opportunities for Transport International and Yuexiu Transport

-0.54

Correlation Coefficient

Transport International  Yuexiu Transport

Excellent diversification

The 3 months correlation between Transport and Yuexiu is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf and Transport International 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 Transport International Holdings are associated (or correlated) with Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of Transport International i.e., Transport International and Yuexiu Transport go up and down completely randomly.

Pair Corralation between Transport International and Yuexiu Transport

Assuming the 90 days horizon Transport International is expected to generate 1.01 times less return on investment than Yuexiu Transport. In addition to that, Transport International is 1.15 times more volatile than Yuexiu Transport Infrastructure. It trades about 0.06 of its total potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.07 per unit of volatility. If you would invest  14.00  in Yuexiu Transport Infrastructure on October 11, 2024 and sell it today you would earn a total of  32.00  from holding Yuexiu Transport Infrastructure or generate 228.57% return on investment over 90 days.

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

Transport International Holdin  vs.  Yuexiu Transport Infrastructur

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Yuexiu Transport Inf

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport International and Yuexiu Transport

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

The idea behind Transport International Holdings and Yuexiu Transport Infrastructure 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .