Correlation Between Huaneng Lancang and Jiangsu Yueda

Can any of the company-specific risk be diversified away by investing in both Huaneng Lancang and Jiangsu Yueda 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 Huaneng Lancang and Jiangsu Yueda into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaneng Lancang River and Jiangsu Yueda Investment, you can compare the effects of market volatilities on Huaneng Lancang and Jiangsu Yueda 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 Huaneng Lancang with a short position of Jiangsu Yueda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Lancang and Jiangsu Yueda.

Diversification Opportunities for Huaneng Lancang and Jiangsu Yueda

-0.75

Correlation Coefficient

Huaneng Lancang  Jiangsu Yueda

Pay attention - limited upside

The 3 months correlation between Huaneng and Jiangsu is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Lancang River and Jiangsu Yueda Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yueda Investment and Huaneng Lancang 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 Huaneng Lancang River are associated (or correlated) with Jiangsu Yueda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yueda Investment has no effect on the direction of Huaneng Lancang i.e., Huaneng Lancang and Jiangsu Yueda go up and down completely randomly.

Pair Corralation between Huaneng Lancang and Jiangsu Yueda

Assuming the 90 days trading horizon Huaneng Lancang is expected to generate 27.58 times less return on investment than Jiangsu Yueda. But when comparing it to its historical volatility, Huaneng Lancang River is 1.43 times less risky than Jiangsu Yueda. It trades about 0.01 of its potential returns per unit of risk. Jiangsu Yueda Investment is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  442.00  in Jiangsu Yueda Investment on September 16, 2024 and sell it today you would earn a total of  46.00  from holding Jiangsu Yueda Investment or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Huaneng Lancang River  vs.  Jiangsu Yueda Investment

Huaneng Lancang River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Lancang River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jiangsu Yueda Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yueda Investment are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yueda sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaneng Lancang and Jiangsu Yueda

The main advantage of trading using opposite Huaneng Lancang and Jiangsu Yueda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Lancang position performs unexpectedly, Jiangsu Yueda 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 Jiangsu Yueda will offset losses from the drop in Jiangsu Yueda's long position.

The idea behind Huaneng Lancang River and Jiangsu Yueda Investment 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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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.