Correlation Between Transurban and Jiangsu Expressway

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

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

Diversification Opportunities for Transurban and Jiangsu Expressway

-0.08

Correlation Coefficient

Transurban  Jiangsu Expressway

Good diversification

The 3 months correlation between Transurban and Jiangsu is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transurban Group and Jiangsu Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway and Transurban 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 Transurban Group are associated (or correlated) with Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Transurban i.e., Transurban and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Transurban and Jiangsu Expressway

Assuming the 90 days horizon Transurban is expected to generate 6.53 times less return on investment than Jiangsu Expressway. But when comparing it to its historical volatility, Transurban Group is 5.79 times less risky than Jiangsu Expressway. It trades about 0.06 of its potential returns per unit of risk. Jiangsu Expressway is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Jiangsu Expressway on September 24, 2024 and sell it today you would earn a total of  63.00  from holding Jiangsu Expressway or generate 165.79% return on investment over 90 days.

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

Transurban Group  vs.  Jiangsu Expressway

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiangsu Expressway

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jiangsu Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transurban and Jiangsu Expressway

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

The idea behind Transurban Group and Jiangsu Expressway 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.