Correlation Between Hunan Investment and Industrial

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

By analyzing existing cross correlation between Hunan Investment Group and Industrial and Commercial, you can compare the effects of market volatilities on Hunan Investment and Industrial 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 Hunan Investment with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Industrial.

Diversification Opportunities for Hunan Investment and Industrial

0.37

Correlation Coefficient

Hunan Investment  Industrial

Weak diversification

The 3 months correlation between Hunan and Industrial is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Hunan Investment i.e., Hunan Investment and Industrial go up and down completely randomly.

Pair Corralation between Hunan Investment and Industrial

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 1.38 times more return on investment than Industrial. However, Hunan Investment is 1.38 times more volatile than Industrial and Commercial. It trades about 0.05 of its potential returns per unit of risk. Industrial and Commercial is currently generating about -0.01 per unit of risk. If you would invest  534.00  in Hunan Investment Group on December 27, 2024 and sell it today you would earn a total of  21.00  from holding Hunan Investment Group or generate 3.93% return on investment over 90 days.

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

Hunan Investment Group  vs.  Industrial and Commercial

Hunan Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hunan Investment and Industrial

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

The idea behind Hunan Investment Group and Industrial and Commercial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.