Correlation Between Heilongjiang Transport and Shaanxi Broadcast

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

Diversification Opportunities for Heilongjiang Transport and Shaanxi Broadcast

0.91

Correlation Coefficient

Heilongjiang Transport  Shaanxi Broadcast

Almost no diversification

The 3 months correlation between Heilongjiang and Shaanxi is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Shaanxi Broadcast

Assuming the 90 days trading horizon Heilongjiang Transport is expected to generate 1.12 times less return on investment than Shaanxi Broadcast. In addition to that, Heilongjiang Transport is 1.01 times more volatile than Shaanxi Broadcast TV. It trades about 0.19 of its total potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about 0.21 per unit of volatility. If you would invest  208.00  in Shaanxi Broadcast TV on September 19, 2024 and sell it today you would earn a total of  81.00  from holding Shaanxi Broadcast TV or generate 38.94% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Shaanxi Broadcast TV

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.

Shaanxi Broadcast

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heilongjiang Transport and Shaanxi Broadcast

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

The idea behind Heilongjiang Transport Development and Shaanxi Broadcast TV 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.