Correlation Between Hubei Yingtong and Strait Innovation

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

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

Diversification Opportunities for Hubei Yingtong and Strait Innovation

0.39

Correlation Coefficient

Hubei Yingtong  Strait Innovation

Weak diversification

The 3 months correlation between Hubei and Strait is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Strait Innovation Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strait Innovation and Hubei Yingtong 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 Hubei Yingtong Telecommunication are associated (or correlated) with Strait Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strait Innovation has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Strait Innovation go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Strait Innovation

Assuming the 90 days trading horizon Hubei Yingtong Telecommunication is expected to generate 0.99 times more return on investment than Strait Innovation. However, Hubei Yingtong Telecommunication is 1.01 times less risky than Strait Innovation. It trades about 0.03 of its potential returns per unit of risk. Strait Innovation Internet is currently generating about 0.0 per unit of risk. If you would invest  1,126  in Hubei Yingtong Telecommunication on September 30, 2024 and sell it today you would earn a total of  221.00  from holding Hubei Yingtong Telecommunication or generate 19.63% return on investment over 90 days.

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

Hubei Yingtong Telecommunicati  vs.  Strait Innovation Internet

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.

Strait Innovation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strait Innovation Internet are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strait Innovation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Yingtong and Strait Innovation

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

The idea behind Hubei Yingtong Telecommunication and Strait Innovation Internet 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.