Correlation Between Hengli Petrochemical and Hubeiyichang Transportation
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By analyzing existing cross correlation between Hengli Petrochemical Co and Hubeiyichang Transportation Group, you can compare the effects of market volatilities on Hengli Petrochemical and Hubeiyichang Transportation 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 Hengli Petrochemical with a short position of Hubeiyichang Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Hubeiyichang Transportation.
Diversification Opportunities for Hengli Petrochemical and Hubeiyichang Transportation
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hengli and Hubeiyichang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation and Hengli Petrochemical 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 Hengli Petrochemical Co are associated (or correlated) with Hubeiyichang Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubeiyichang Transportation has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Hubeiyichang Transportation go up and down completely randomly.
Pair Corralation between Hengli Petrochemical and Hubeiyichang Transportation
Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to generate 0.62 times more return on investment than Hubeiyichang Transportation. However, Hengli Petrochemical Co is 1.62 times less risky than Hubeiyichang Transportation. It trades about 0.34 of its potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about -0.06 per unit of risk. If you would invest 1,412 in Hengli Petrochemical Co on September 27, 2024 and sell it today you would earn a total of 128.00 from holding Hengli Petrochemical Co or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hengli Petrochemical Co vs. Hubeiyichang Transportation Gr
Performance |
| Timeline |
| Hengli Petrochemical |
| Hubeiyichang Transportation |
Hengli Petrochemical and Hubeiyichang Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hengli Petrochemical and Hubeiyichang Transportation
The main advantage of trading using opposite Hengli Petrochemical and Hubeiyichang Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengli Petrochemical position performs unexpectedly, Hubeiyichang Transportation 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 Hubeiyichang Transportation will offset losses from the drop in Hubeiyichang Transportation's long position.The idea behind Hengli Petrochemical Co and Hubeiyichang Transportation Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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