Correlation Between Hubei Yingtong and Railway Signal

Can any of the company-specific risk be diversified away by investing in both Hubei Yingtong and Railway Signal 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 Railway Signal 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 Railway Signal Communication, you can compare the effects of market volatilities on Hubei Yingtong and Railway Signal 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 Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Yingtong and Railway Signal.

Diversification Opportunities for Hubei Yingtong and Railway Signal

0.57

Correlation Coefficient

Hubei Yingtong  Railway Signal

Very weak diversification

The 3 months correlation between Hubei and Railway is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Yingtong Telecommunicati and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu 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 Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of Hubei Yingtong i.e., Hubei Yingtong and Railway Signal go up and down completely randomly.

Pair Corralation between Hubei Yingtong and Railway Signal

Assuming the 90 days trading horizon Hubei Yingtong is expected to generate 3.83 times less return on investment than Railway Signal. In addition to that, Hubei Yingtong is 1.32 times more volatile than Railway Signal Communication. It trades about 0.02 of its total potential returns per unit of risk. Railway Signal Communication is currently generating about 0.08 per unit of volatility. If you would invest  544.00  in Railway Signal Communication on September 27, 2024 and sell it today you would earn a total of  76.00  from holding Railway Signal Communication or generate 13.97% return on investment over 90 days.

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

Hubei Yingtong Telecommunicati  vs.  Railway Signal Communication

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 strong basic indicators, Hubei Yingtong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Railway Signal Commu

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Yingtong and Railway Signal

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

The idea behind Hubei Yingtong Telecommunication and Railway Signal Communication 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.