Correlation Between HanS Laser and Shantou Wanshun

Can any of the company-specific risk be diversified away by investing in both HanS Laser and Shantou Wanshun 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 HanS Laser and Shantou Wanshun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HanS Laser Tech and Shantou Wanshun Package, you can compare the effects of market volatilities on HanS Laser and Shantou Wanshun 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 HanS Laser with a short position of Shantou Wanshun. Check out your portfolio center. Please also check ongoing floating volatility patterns of HanS Laser and Shantou Wanshun.

Diversification Opportunities for HanS Laser and Shantou Wanshun

0.69

Correlation Coefficient

HanS Laser  Shantou Wanshun

Poor diversification

The 3 months correlation between HanS and Shantou is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HanS Laser Tech and Shantou Wanshun Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantou Wanshun Package and HanS Laser 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 HanS Laser Tech are associated (or correlated) with Shantou Wanshun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantou Wanshun Package has no effect on the direction of HanS Laser i.e., HanS Laser and Shantou Wanshun go up and down completely randomly.

Pair Corralation between HanS Laser and Shantou Wanshun

Assuming the 90 days trading horizon HanS Laser Tech is expected to generate 0.76 times more return on investment than Shantou Wanshun. However, HanS Laser Tech is 1.31 times less risky than Shantou Wanshun. It trades about 0.01 of its potential returns per unit of risk. Shantou Wanshun Package is currently generating about -0.03 per unit of risk. If you would invest  2,540  in HanS Laser Tech on October 3, 2024 and sell it today you would lose (40.00) from holding HanS Laser Tech or give up 1.57% of portfolio value over 90 days.

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

HanS Laser Tech  vs.  Shantou Wanshun Package

HanS Laser Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HanS Laser and Shantou Wanshun

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

The idea behind HanS Laser Tech and Shantou Wanshun Package 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.