Correlation Between Hunan TV and Western Superconducting

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

By analyzing existing cross correlation between Hunan TV Broadcast and Western Superconducting Tech, you can compare the effects of market volatilities on Hunan TV and Western Superconducting 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 TV with a short position of Western Superconducting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Western Superconducting.

Diversification Opportunities for Hunan TV and Western Superconducting

0.64

Correlation Coefficient

Hunan TV  Western Superconducting

Poor diversification

The 3 months correlation between Hunan and Western is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Western Superconducting Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Superconducting and Hunan TV 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 TV Broadcast are associated (or correlated) with Western Superconducting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Superconducting has no effect on the direction of Hunan TV i.e., Hunan TV and Western Superconducting go up and down completely randomly.

Pair Corralation between Hunan TV and Western Superconducting

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to under-perform the Western Superconducting. In addition to that, Hunan TV is 1.98 times more volatile than Western Superconducting Tech. It trades about -0.05 of its total potential returns per unit of risk. Western Superconducting Tech is currently generating about -0.09 per unit of volatility. If you would invest  4,459  in Western Superconducting Tech on September 24, 2024 and sell it today you would lose (132.00) from holding Western Superconducting Tech or give up 2.96% of portfolio value over 90 days.

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

Hunan TV Broadcast  vs.  Western Superconducting Tech

Hunan TV Broadcast

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV sustained solid returns over the last few months and may actually be approaching a breakup point.

Western Superconducting

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Superconducting Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Superconducting sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan TV and Western Superconducting

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

The idea behind Hunan TV Broadcast and Western Superconducting Tech 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.