Correlation Between Hengli Industrial and Sailun Jinyu

Can any of the company-specific risk be diversified away by investing in both Hengli Industrial and Sailun Jinyu 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 Sailun Jinyu 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 Sailun Jinyu Group, you can compare the effects of market volatilities on Hengli Industrial and Sailun Jinyu 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 Sailun Jinyu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Industrial and Sailun Jinyu.

Diversification Opportunities for Hengli Industrial and Sailun Jinyu

0.09

Correlation Coefficient

Hengli Industrial  Sailun Jinyu

Significant diversification

The 3 months correlation between Hengli and Sailun is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Industrial Development and Sailun Jinyu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sailun Jinyu Group 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 Sailun Jinyu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sailun Jinyu Group has no effect on the direction of Hengli Industrial i.e., Hengli Industrial and Sailun Jinyu go up and down completely randomly.

Pair Corralation between Hengli Industrial and Sailun Jinyu

Assuming the 90 days trading horizon Hengli Industrial Development is expected to under-perform the Sailun Jinyu. In addition to that, Hengli Industrial is 1.61 times more volatile than Sailun Jinyu Group. It trades about -0.03 of its total potential returns per unit of risk. Sailun Jinyu Group is currently generating about 0.05 per unit of volatility. If you would invest  961.00  in Sailun Jinyu Group on October 4, 2024 and sell it today you would earn a total of  472.00  from holding Sailun Jinyu Group or generate 49.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Hengli Industrial Development  vs.  Sailun Jinyu Group

Hengli Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 8 (%) 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.

Sailun Jinyu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sailun Jinyu Group 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.

Pair Trading with Hengli Industrial and Sailun Jinyu

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

The idea behind Hengli Industrial Development and Sailun Jinyu Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.