Correlation Between Hengli Industrial and CIMC Vehicles

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

By analyzing existing cross correlation between Hengli Industrial Development and CIMC Vehicles Co, you can compare the effects of market volatilities on Hengli Industrial and CIMC Vehicles 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 Hengli Industrial with a short position of CIMC Vehicles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Industrial and CIMC Vehicles.

Diversification Opportunities for Hengli Industrial and CIMC Vehicles

0.25

Correlation Coefficient

Hengli Industrial  CIMC Vehicles

Modest diversification

The 3 months correlation between Hengli and CIMC is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Industrial Development and CIMC Vehicles Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMC Vehicles and Hengli Industrial 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 Hengli Industrial Development are associated (or correlated) with CIMC Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMC Vehicles has no effect on the direction of Hengli Industrial i.e., Hengli Industrial and CIMC Vehicles go up and down completely randomly.

Pair Corralation between Hengli Industrial and CIMC Vehicles

Assuming the 90 days trading horizon Hengli Industrial Development is expected to generate 1.08 times more return on investment than CIMC Vehicles. However, Hengli Industrial is 1.08 times more volatile than CIMC Vehicles Co. It trades about 0.14 of its potential returns per unit of risk. CIMC Vehicles Co is currently generating about 0.05 per unit of risk. If you would invest  165.00  in Hengli Industrial Development on September 23, 2024 and sell it today you would earn a total of  52.00  from holding Hengli Industrial Development or generate 31.52% return on investment over 90 days.

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

Hengli Industrial Development  vs.  CIMC Vehicles Co

Hengli Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

CIMC Vehicles

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CIMC Vehicles Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CIMC Vehicles may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hengli Industrial and CIMC Vehicles

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

The idea behind Hengli Industrial Development and CIMC Vehicles Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.