Correlation Between Hengli Industrial and Guangzhou Haozhi

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

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

Diversification Opportunities for Hengli Industrial and Guangzhou Haozhi

0.53

Correlation Coefficient

Hengli Industrial  Guangzhou Haozhi

Very weak diversification

The 3 months correlation between Hengli and Guangzhou is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Industrial Development and Guangzhou Haozhi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haozhi Ind and Hengli Industrial 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 Hengli Industrial Development are associated (or correlated) with Guangzhou Haozhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haozhi Ind has no effect on the direction of Hengli Industrial i.e., Hengli Industrial and Guangzhou Haozhi go up and down completely randomly.

Pair Corralation between Hengli Industrial and Guangzhou Haozhi

Assuming the 90 days trading horizon Hengli Industrial Development is expected to under-perform the Guangzhou Haozhi. But the stock apears to be less risky and, when comparing its historical volatility, Hengli Industrial Development is 1.35 times less risky than Guangzhou Haozhi. The stock trades about -0.03 of its potential returns per unit of risk. The Guangzhou Haozhi Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  872.00  in Guangzhou Haozhi Industrial on October 10, 2024 and sell it today you would earn a total of  893.00  from holding Guangzhou Haozhi Industrial or generate 102.41% return on investment over 90 days.

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

Hengli Industrial Development  vs.  Guangzhou Haozhi Industrial

Hengli Industrial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Haozhi Ind

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengli Industrial and Guangzhou Haozhi

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

The idea behind Hengli Industrial Development and Guangzhou Haozhi Industrial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.