Correlation Between Zhongtong Guomai and Hubei Yingtong

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

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

Diversification Opportunities for Zhongtong Guomai and Hubei Yingtong

0.24

Correlation Coefficient

Zhongtong Guomai  Hubei Yingtong

Modest diversification

The 3 months correlation between Zhongtong and Hubei is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Zhongtong Guomai Communication and Hubei Yingtong Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Yingtong Telec and Zhongtong Guomai 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 Zhongtong Guomai Communication are associated (or correlated) with Hubei Yingtong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Yingtong Telec has no effect on the direction of Zhongtong Guomai i.e., Zhongtong Guomai and Hubei Yingtong go up and down completely randomly.

Pair Corralation between Zhongtong Guomai and Hubei Yingtong

Assuming the 90 days trading horizon Zhongtong Guomai Communication is expected to under-perform the Hubei Yingtong. But the stock apears to be less risky and, when comparing its historical volatility, Zhongtong Guomai Communication is 1.63 times less risky than Hubei Yingtong. The stock trades about -0.03 of its potential returns per unit of risk. The Hubei Yingtong Telecommunication is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,248  in Hubei Yingtong Telecommunication on September 27, 2024 and sell it today you would lose (32.00) from holding Hubei Yingtong Telecommunication or give up 2.56% of portfolio value over 90 days.

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

Zhongtong Guomai Communication  vs.  Hubei Yingtong Telecommunicati

Zhongtong Guomai Com

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Zhongtong Guomai and Hubei Yingtong

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

The idea behind Zhongtong Guomai Communication and Hubei Yingtong Telecommunication 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.