Correlation Between Eastern Communications and Wuhan Xianglong
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By analyzing existing cross correlation between Eastern Communications Co and Wuhan Xianglong Power, you can compare the effects of market volatilities on Eastern Communications and Wuhan Xianglong 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 Eastern Communications with a short position of Wuhan Xianglong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Communications and Wuhan Xianglong.
Diversification Opportunities for Eastern Communications and Wuhan Xianglong
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Wuhan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Communications Co and Wuhan Xianglong Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Xianglong Power and Eastern Communications 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 Eastern Communications Co are associated (or correlated) with Wuhan Xianglong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Xianglong Power has no effect on the direction of Eastern Communications i.e., Eastern Communications and Wuhan Xianglong go up and down completely randomly.
Pair Corralation between Eastern Communications and Wuhan Xianglong
Assuming the 90 days trading horizon Eastern Communications Co is expected to generate 0.7 times more return on investment than Wuhan Xianglong. However, Eastern Communications Co is 1.42 times less risky than Wuhan Xianglong. It trades about -0.24 of its potential returns per unit of risk. Wuhan Xianglong Power is currently generating about -0.34 per unit of risk. If you would invest 43.00 in Eastern Communications Co on October 14, 2024 and sell it today you would lose (5.00) from holding Eastern Communications Co or give up 11.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Communications Co vs. Wuhan Xianglong Power
Performance |
| Timeline |
| Eastern Communications |
| Wuhan Xianglong Power |
Eastern Communications and Wuhan Xianglong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Communications and Wuhan Xianglong
The main advantage of trading using opposite Eastern Communications and Wuhan Xianglong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Communications position performs unexpectedly, Wuhan Xianglong 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 Wuhan Xianglong will offset losses from the drop in Wuhan Xianglong's long position.The idea behind Eastern Communications Co and Wuhan Xianglong Power 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.
| Wuhan Xianglong vs. Ping An Insurance | Wuhan Xianglong vs. China Satellite Communications | Wuhan Xianglong vs. Eastern Communications Co | Wuhan Xianglong vs. Fiberhome Telecommunication Technologies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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