Correlation Between Heilongjiang Transport and Anhui Deli

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

By analyzing existing cross correlation between Heilongjiang Transport Development and Anhui Deli Household, you can compare the effects of market volatilities on Heilongjiang Transport and Anhui Deli 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 Heilongjiang Transport with a short position of Anhui Deli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Anhui Deli.

Diversification Opportunities for Heilongjiang Transport and Anhui Deli

0.83

Correlation Coefficient

Heilongjiang Transport  Anhui Deli

Very poor diversification

The 3 months correlation between Heilongjiang and Anhui is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and Heilongjiang Transport 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 Heilongjiang Transport Development are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Anhui Deli go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Anhui Deli

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 1.11 times more return on investment than Anhui Deli. However, Heilongjiang Transport is 1.11 times more volatile than Anhui Deli Household. It trades about 0.07 of its potential returns per unit of risk. Anhui Deli Household is currently generating about 0.0 per unit of risk. If you would invest  301.00  in Heilongjiang Transport Development on September 29, 2024 and sell it today you would earn a total of  67.00  from holding Heilongjiang Transport Development or generate 22.26% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Anhui Deli Household

Heilongjiang Transport

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Heilongjiang Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Deli Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Deli Household has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Heilongjiang Transport and Anhui Deli

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

The idea behind Heilongjiang Transport Development and Anhui Deli Household 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.