Correlation Between Soyea Technology and Henzhen Zhaowei

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

By analyzing existing cross correlation between Soyea Technology Co and Henzhen Zhaowei Machinery, you can compare the effects of market volatilities on Soyea Technology and Henzhen Zhaowei 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 Soyea Technology with a short position of Henzhen Zhaowei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soyea Technology and Henzhen Zhaowei.

Diversification Opportunities for Soyea Technology and Henzhen Zhaowei

0.87

Correlation Coefficient

Soyea Technology  Henzhen Zhaowei

Very poor diversification

The 3 months correlation between Soyea and Henzhen is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Soyea Technology Co and Henzhen Zhaowei Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henzhen Zhaowei Machinery and Soyea Technology 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 Soyea Technology Co are associated (or correlated) with Henzhen Zhaowei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henzhen Zhaowei Machinery has no effect on the direction of Soyea Technology i.e., Soyea Technology and Henzhen Zhaowei go up and down completely randomly.

Pair Corralation between Soyea Technology and Henzhen Zhaowei

Assuming the 90 days trading horizon Soyea Technology Co is expected to under-perform the Henzhen Zhaowei. But the stock apears to be less risky and, when comparing its historical volatility, Soyea Technology Co is 1.62 times less risky than Henzhen Zhaowei. The stock trades about -0.38 of its potential returns per unit of risk. The Henzhen Zhaowei Machinery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,421  in Henzhen Zhaowei Machinery on October 12, 2024 and sell it today you would earn a total of  194.00  from holding Henzhen Zhaowei Machinery or generate 2.3% return on investment over 90 days.

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

Soyea Technology Co  vs.  Henzhen Zhaowei Machinery

Soyea Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Soyea Technology Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Soyea Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Henzhen Zhaowei Machinery

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Henzhen Zhaowei Machinery are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henzhen Zhaowei sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Soyea Technology and Henzhen Zhaowei

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

The idea behind Soyea Technology Co and Henzhen Zhaowei Machinery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.