Correlation Between Weichai Heavy and Hongrun Construction
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By analyzing existing cross correlation between Weichai Heavy Machinery and Hongrun Construction Group, you can compare the effects of market volatilities on Weichai Heavy and Hongrun Construction 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 Weichai Heavy with a short position of Hongrun Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Heavy and Hongrun Construction.
Diversification Opportunities for Weichai Heavy and Hongrun Construction
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Weichai and Hongrun is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Heavy Machinery and Hongrun Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongrun Construction and Weichai Heavy 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 Weichai Heavy Machinery are associated (or correlated) with Hongrun Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongrun Construction has no effect on the direction of Weichai Heavy i.e., Weichai Heavy and Hongrun Construction go up and down completely randomly.
Pair Corralation between Weichai Heavy and Hongrun Construction
Assuming the 90 days trading horizon Weichai Heavy Machinery is expected to generate 1.76 times more return on investment than Hongrun Construction. However, Weichai Heavy is 1.76 times more volatile than Hongrun Construction Group. It trades about 0.11 of its potential returns per unit of risk. Hongrun Construction Group is currently generating about 0.12 per unit of risk. If you would invest 1,118 in Weichai Heavy Machinery on August 29, 2024 and sell it today you would earn a total of 123.00 from holding Weichai Heavy Machinery or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weichai Heavy Machinery vs. Hongrun Construction Group
Performance |
| Timeline |
| Weichai Heavy Machinery |
| Hongrun Construction |
Weichai Heavy and Hongrun Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Heavy and Hongrun Construction
The main advantage of trading using opposite Weichai Heavy and Hongrun Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Heavy position performs unexpectedly, Hongrun Construction 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 Hongrun Construction will offset losses from the drop in Hongrun Construction's long position.| Weichai Heavy vs. PetroChina Co Ltd | Weichai Heavy vs. China State Construction | Weichai Heavy vs. China Mobile Limited | Weichai Heavy vs. Industrial and Commercial |
| Hongrun Construction vs. PetroChina Co Ltd | Hongrun Construction vs. China State Construction | Hongrun Construction vs. China Mobile Limited | Hongrun Construction vs. Industrial and Commercial |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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