Correlation Between Hubeiyichang Transportation and Danhua Chemical
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By analyzing existing cross correlation between Hubeiyichang Transportation Group and Danhua Chemical Technology, you can compare the effects of market volatilities on Hubeiyichang Transportation and Danhua Chemical 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 Hubeiyichang Transportation with a short position of Danhua Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubeiyichang Transportation and Danhua Chemical.
Diversification Opportunities for Hubeiyichang Transportation and Danhua Chemical
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hubeiyichang and Danhua is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Danhua Chemical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danhua Chemical Tech and Hubeiyichang Transportation 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 Hubeiyichang Transportation Group are associated (or correlated) with Danhua Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danhua Chemical Tech has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Danhua Chemical go up and down completely randomly.
Pair Corralation between Hubeiyichang Transportation and Danhua Chemical
Assuming the 90 days trading horizon Hubeiyichang Transportation is expected to generate 1.73 times less return on investment than Danhua Chemical. But when comparing it to its historical volatility, Hubeiyichang Transportation Group is 1.69 times less risky than Danhua Chemical. It trades about 0.01 of its potential returns per unit of risk. Danhua Chemical Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 340.00 in Danhua Chemical Technology on September 3, 2024 and sell it today you would lose (29.00) from holding Danhua Chemical Technology or give up 8.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hubeiyichang Transportation Gr vs. Danhua Chemical Technology
Performance |
| Timeline |
| Hubeiyichang Transportation |
| Danhua Chemical Tech |
Hubeiyichang Transportation and Danhua Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hubeiyichang Transportation and Danhua Chemical
The main advantage of trading using opposite Hubeiyichang Transportation and Danhua Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hubeiyichang Transportation position performs unexpectedly, Danhua Chemical 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 Danhua Chemical will offset losses from the drop in Danhua Chemical's long position.The idea behind Hubeiyichang Transportation Group and Danhua Chemical Technology 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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