Correlation Between HanS Laser and XiAn Dagang

Can any of the company-specific risk be diversified away by investing in both HanS Laser and XiAn Dagang 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 XiAn Dagang 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 XiAn Dagang Road, you can compare the effects of market volatilities on HanS Laser and XiAn Dagang 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 XiAn Dagang. Check out your portfolio center. Please also check ongoing floating volatility patterns of HanS Laser and XiAn Dagang.

Diversification Opportunities for HanS Laser and XiAn Dagang

0.53

Correlation Coefficient

HanS Laser  XiAn Dagang

Very weak diversification

The 3 months correlation between HanS and XiAn is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding HanS Laser Tech and XiAn Dagang Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XiAn Dagang Road 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 XiAn Dagang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XiAn Dagang Road has no effect on the direction of HanS Laser i.e., HanS Laser and XiAn Dagang go up and down completely randomly.

Pair Corralation between HanS Laser and XiAn Dagang

Assuming the 90 days trading horizon HanS Laser Tech is expected to generate 0.56 times more return on investment than XiAn Dagang. However, HanS Laser Tech is 1.79 times less risky than XiAn Dagang. It trades about 0.1 of its potential returns per unit of risk. XiAn Dagang Road is currently generating about 0.02 per unit of risk. If you would invest  2,599  in HanS Laser Tech on December 24, 2024 and sell it today you would earn a total of  312.00  from holding HanS Laser Tech or generate 12.0% return on investment over 90 days.

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

HanS Laser Tech  vs.  XiAn Dagang Road

HanS Laser Tech

Risk-Adjusted Performance

OK

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

XiAn Dagang Road

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XiAn Dagang Road are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XiAn Dagang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HanS Laser and XiAn Dagang

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

The idea behind HanS Laser Tech and XiAn Dagang Road 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..