Correlation Between MTR Corp and Guangshen Railway
Can any of the company-specific risk be diversified away by investing in both MTR Corp and Guangshen 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 MTR Corp and Guangshen Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTR Corp Ltd and Guangshen Railway, you can compare the effects of market volatilities on MTR Corp and Guangshen 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 MTR Corp with a short position of Guangshen Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTR Corp and Guangshen Railway.
Diversification Opportunities for MTR Corp and Guangshen Railway
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MTR and Guangshen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MTR Corp Ltd and Guangshen Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangshen Railway and MTR Corp 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 MTR Corp Ltd are associated (or correlated) with Guangshen Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangshen Railway has no effect on the direction of MTR Corp i.e., MTR Corp and Guangshen Railway go up and down completely randomly.
Pair Corralation between MTR Corp and Guangshen Railway
If you would invest 987.00 in MTR Corp Ltd on September 12, 2024 and sell it today you would earn a total of 78.00 from holding MTR Corp Ltd or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
MTR Corp Ltd vs. Guangshen Railway
Performance |
| Timeline |
| MTR Corp |
| Guangshen Railway |
MTR Corp and Guangshen Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTR Corp and Guangshen Railway
The main advantage of trading using opposite MTR Corp and Guangshen Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTR Corp position performs unexpectedly, Guangshen 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 Guangshen Railway will offset losses from the drop in Guangshen Railway's long position.The idea behind MTR Corp Ltd and Guangshen Railway 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.| Guangshen Railway vs. Trinity Industries | Guangshen Railway vs. CSX Corporation | Guangshen Railway vs. Norfolk Southern | Guangshen Railway vs. Greenbrier Companies |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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