Correlation Between HMTNew Technical and China Railway

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Can any of the company-specific risk be diversified away by investing in both HMTNew Technical and China Railway 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 HMTNew Technical and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMTNew Technical and China Railway Construction, you can compare the effects of market volatilities on HMTNew Technical and China Railway 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 HMTNew Technical with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMTNew Technical and China Railway.

Diversification Opportunities for HMTNew Technical and China Railway

HMTNewChinaDiversified AwayHMTNewChinaDiversified Away100%
-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between HMTNew and China is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HMTNew Technical and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and HMTNew Technical 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 HMTNew Technical are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of HMTNew Technical i.e., HMTNew Technical and China Railway go up and down completely randomly.

Pair Corralation between HMTNew Technical and China Railway

Assuming the 90 days trading horizon HMTNew Technical is expected to generate 2.17 times more return on investment than China Railway. However, HMTNew Technical is 2.17 times more volatile than China Railway Construction. It trades about 0.14 of its potential returns per unit of risk. China Railway Construction is currently generating about 0.12 per unit of risk. If you would invest  3,565  in HMTNew Technical on December 8, 2024 and sell it today you would earn a total of  269.00  from holding HMTNew Technical or generate 7.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HMTNew Technical  vs.  China Railway Construction

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030
JavaScript chart by amCharts 3.21.15603306 688425
       Timeline  
HMTNew Technical 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HMTNew Technical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMTNew Technical sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15JanFebMarFebMar30323436384042
China Railway Constr 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days China Railway Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15JanFebMarFebMar44.24.44.64.8

HMTNew Technical and China Railway Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.01-8.25-5.48-2.720.02.925.888.8511.81 0.050.100.150.20
JavaScript chart by amCharts 3.21.15603306 688425
       Returns  

Pair Trading with HMTNew Technical and China Railway

The main advantage of trading using opposite HMTNew Technical and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMTNew Technical position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.
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The idea behind HMTNew Technical and China Railway Construction 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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