Correlation Between Heilongjiang Transport and Metro Investment

Can any of the company-specific risk be diversified away by investing in both Heilongjiang Transport and Metro Investment 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 Metro Investment 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 Metro Investment Development, you can compare the effects of market volatilities on Heilongjiang Transport and Metro Investment 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 Metro Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Metro Investment.

Diversification Opportunities for Heilongjiang Transport and Metro Investment

0.75

Correlation Coefficient

Heilongjiang Transport  Metro Investment

Poor diversification

The 3 months correlation between Heilongjiang and Metro is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Metro Investment Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Investment Dev 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 Metro Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Investment Dev has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Metro Investment go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Metro Investment

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 1.06 times more return on investment than Metro Investment. However, Heilongjiang Transport is 1.06 times more volatile than Metro Investment Development. It trades about 0.09 of its potential returns per unit of risk. Metro Investment Development is currently generating about 0.05 per unit of risk. If you would invest  303.00  in Heilongjiang Transport Development on September 19, 2024 and sell it today you would earn a total of  97.00  from holding Heilongjiang Transport Development or generate 32.01% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Metro Investment Development

Heilongjiang Transport

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heilongjiang Transport sustained solid returns over the last few months and may actually be approaching a breakup point.

Metro Investment Dev

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Investment Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Metro Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heilongjiang Transport and Metro Investment

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

The idea behind Heilongjiang Transport Development and Metro Investment Development 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.