Correlation Between Huagong Tech and Postal Savings

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

By analyzing existing cross correlation between Huagong Tech Co and Postal Savings Bank, you can compare the effects of market volatilities on Huagong Tech and Postal Savings 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 Huagong Tech with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huagong Tech and Postal Savings.

Diversification Opportunities for Huagong Tech and Postal Savings

-0.2

Correlation Coefficient

Huagong Tech  Postal Savings

Good diversification

The 3 months correlation between Huagong and Postal is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Huagong Tech Co and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and Huagong Tech 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 Huagong Tech Co are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Huagong Tech i.e., Huagong Tech and Postal Savings go up and down completely randomly.

Pair Corralation between Huagong Tech and Postal Savings

Assuming the 90 days trading horizon Huagong Tech Co is expected to generate 2.17 times more return on investment than Postal Savings. However, Huagong Tech is 2.17 times more volatile than Postal Savings Bank. It trades about 0.09 of its potential returns per unit of risk. Postal Savings Bank is currently generating about -0.05 per unit of risk. If you would invest  3,369  in Huagong Tech Co on October 13, 2024 and sell it today you would earn a total of  522.00  from holding Huagong Tech Co or generate 15.49% return on investment over 90 days.

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

Huagong Tech Co  vs.  Postal Savings Bank

Huagong Tech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huagong Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huagong Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Postal Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Huagong Tech and Postal Savings

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

The idea behind Huagong Tech Co and Postal Savings Bank 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.